BERMUDA, July 30, 2015 / PRNewswire – Nephila Capital is excited to announce that it recently agreed to provide drought protection to farmers in multiple countries in Africa to help transfer the risk of dry weather impacting crop yield. The deal was executed through Nephila’s Syndicate 2357 at Lloyd’s of London, and is the first weather risk transfer transaction written by the syndicate. Lloyd’s has a storied history as a market that supports innovative and unusual risk, and an express part of Syndicate 2357′s business plan is to build out a weather risk transfer business within the market.
Nephila joins a panel of risk capacity providers that collectively extended $US 72.5 million of coverage working with Willis Group Holdings plc through the African Risk Capacity (“ARC”) initiative, which is a sovereign pool of funds that compensates African Union governments when adverse weather and natural catastrophe events occur. The drought reinsurance program is entering its second year and will last for twelve months through April 2016. Farmers in nine countries across Western and Eastern Africa receive compensation from their respective country within days of contract expiry if crop yields are low due to a lack of rain.
The structure of the reinsurance program highlights a benefit of parametric weather risk transfer products: swift settlement and efficient transfer of funds to the underlying insured. In this case, farmers dealing with the economic and community impact of drought can avoid a lengthy claims process and receive compensation rapidly. Payment is based upon rainfall measured by the US National Oceanic and Atmospheric Administration and crop impacts estimated by the Food and Agriculture Organization of the United Nations. This guarantees that measurements are transparent and unbiased. ARC then uses the rainfall estimates to calculate payments, if triggered, to countries and their farmers.
Such products are increasingly used by entities that are exposed to variation in temperature, rain, snow, wind, water, or sunshine – weather risk transfer allows the impact of damage, including lost revenue or business interruption, to be offset by an efficient injection of capital if defined triggers are met. Beyond agriculture, many businesses and municipalities also purchase weather protection, in sectors such as traditional and renewable energy, recreation and tourism, construction, and transportation.
Nephila is proud to support the ARC in its drought risk management program, as the latest step in over fifteen years of providing weather risk transfer protection on behalf of our underlying investors. We launched our first dedicated weather fund in January 2005 and have deep experience in the sector. Working with Willis and the ARC, through Lloyd’s of London and alongside other capacity providers in this market, on such a transaction is another encouraging sign that the weather risk transfer market will continue to grow. A growing awareness that weather risk can be quantified and transferred, like other financial and insurance-related exposures, is a healthy development for the global economy and for society.
About Nephila Capital
Nephila Capital Ltd is a leading investment manager specializing in reinsurance risk, and is the largest institutional asset manager of investment funds dedicated to natural catastrophe and weather risk. Nephila offers a broad range of investment products focusing on instruments such as insurance-linked securities, catastrophe bonds, insurance swaps, and weather derivatives.
Nephila has assets under management of approximately $9.5 billion as of June 30, 2015 and has been managing institutional assets in this space since it was founded in 1998. The firm has over 100 employees based in its Bermuda headquarters, San Francisco, CA, Nashville, TN and London. Further information can be found at www.nephila.com.