Weatherbill

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WeatherBill, Inc.
Type Private start-up
Founded 2006
Headquarters San Francisco, California, USA
Key people David Friedberg, Founder; Siraj Khaliq, Founder
Industry Financial services
Website www.weatherbill.com

WeatherBill is an electronic commerce website launched in January 2007 that allows companies to buy contracts based on future weather events as a hedge against weather-based business risks.

Contents

Investors and underwriters

Investors in the company's $4.3 million seed funding round include Index Ventures, a European Venture Capital firm, New Enterprise Associates, Atomico Investments, a private equity fund managed by Niklas Zennstrom, Sean Park, who runs blog site parkparadigm.com, Joshua Schachter, and First Round Capital. On October 17, 2007 the company closed a $12.5 million Series A round, with venture funding from New Enterprise Associates, Index Ventures, Allen & Company, Atomico Investments, and Sean Park.[1]

Nephila Capital, a Bermuda-based investment manager, reinsurance company, and hedge fund, underwrites the risk of weather-based payouts.[1]

Products

WeatherBill's products are financial instruments based on future weather events, marketed via the company's website to businesses that are affected by weather events. These are promises by WeatherBill to pay the buyer a specific amount of money if a certain weather event happens at a particular location within a specified timeframe. They are not insurance, in that there is no claims process or requirement to prove damages.[1]

As an example, TechCrunch mentions golf course owners may buy a contract by which they will receive $1,000 per day of rain, thereby shielding the course against losses due to bad weather. The company also markets contracts to commodity traders, who may use them to hedge investments they have made in future crops or other goods whose value is affected by the weather. WeatherBill's pricing is based on weather statistics and computer modeling of future weather forecasts and trends.[2] One of the company's early clients is an Arizona ski resort that uses Weatherbill to hedge against losses from a refund it offers season ticket holders should there be inadequate snowfall during the season.[1]

According to the company's website, United States contracts are legal and regulated by the Commodity Futures Trading Commission. Due to limitations imposed by the Commodity Exchange Act, contracts in the United States are only sold to buyers who meet certain eligibility requirements. As of October 17, 2007 the company also offered contracts in the United Kingdom, Germany, Netherlands, Spain, and Norway.[1]

Website Features

Flash-based weatherbill.com serves as both the company's corporate website and also a front-end interface by which customers may obtain quotes for and purchase contracts. WeatherBill also offers various free software tools from its website that companies may use to assess and manage their weather risks.

Similar Products

WeatherBill contracts share some characteristics of derivatives, insurance, and gambling[citation needed]. Derivatives are financial instruments tied to the value of a particular asset such as stock shares, bonds, foreign currency, or an agricultural crop, whereas WeatherBill contracts are tied not to an asset but to weather occurrences.

There exists a key difference between Weatherbill weather protection and insurance. Companies can buy insurance polices for protection against weather-based risks such as floods, storms, or other extreme events, but the policies pay out only in the event of an actual economic loss due to disaster, and reimburse only the actual amount of loss via a claims procedure. By contrast, WeatherBill contracts pay a fixed amount based on weather events without regard to the extent if any of actual loss. There is no claims process.

Finally, gambling is a recreational activity by which individuals may wager that certain events will happen for purposes of personal gain, against other individuals or companies willing to bet that those events will not happen, with the price (the odds) set by arbitrage by the house between the two. WeatherBill, by contrast, is the underwriter of its own contracts, and serves as a market mechanism to shield businesses against losses.

References

  1. 1.0 1.1 1.2 1.3 1.4 Ken Schachter (October 17, 2007). "$12.5M Rains on Weather Risk Startup". Red Herring. http://www.redherring.com/Home/22992. Retrieved 2007-10-18. 
  2. Michael Arrington (January 15, 2007). "WeatherBill Launches, Announces All Star Investors". TechCrunch. http://www.techcrunch.com/2007/01/15/weatherbill-launches-announces-all-star-investors. Retrieved 2007-01-16. 

Further reading

External links

Personal tools

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