Element Re Capital Products plans to set up a London office to originate weather deals for end users. The subsidiary of XL Capital has hired Dan Tomlinson, marketing manager at WeatherXchange, to set up the London office, but will continue to trade European weather derivatives from Stamford, Conn. Tomlinson and Lynda Clemmons, president and ceo, declined comment.
A weather derivatives official familiar with Element Re's operation estimated the firm had originated USD2 billion (notional) of weather deals since its inception in August 2000 and estimated Europe could account for approximately half of the firm's origination business. Part of the reason for setting up the office is that European power companies are currently better capitalized than several of their U.S. counterparts. For example RWE is rated single A plus and E.on AA minus, whereas Dynegy and NRG Energy are rated single B and D respectively.
The London office will likely concentrate on marketing weather and weather related deals, such as gas options with weather triggers, to power companies. However, it will also attempt to win business in other sectors, such as agriculture, manufacturing and entertainment. Tomlinson is expected to start in the new year with the first deals being executed in February. At WeatherXchange Tomlinson reported to Cindy Daws, managing director.
