RenaissanceRe is setting up a weather derivatives desk to complement its catastrophe risk management departments. Michael Cash, v.p. in Hamilton, Bermuda, expects the reinsurance company to be actively trading weather products by year-end. He added, "the best way to learn is to get your hands dirty."
The reinsurer will start with plain-vanilla derivatives, such as heating and cooling degree-day contracts, and then move into structured products as the company's knowledge of the market increases. After speaking with Enron and other weather derivatives players, Renaissance has concluded that there is now sufficient liquidity to "put our toe in the water and splash around," said Cash.
