2005 Asia Pacific Committee Meeting Europe and Americas Update Strong Growth-Where and Why?

1. 2005 Asia Pacific Committee Meeting Europe and Americas Update Strong Growth-Where and Why? Brian O’Hearne, WRMA President GuaranteedWeather President and CEO

2. GuaranteedWeather Background • April, 2003 buyout with equity from Ramsey Quantitative Systems, Inc., a Louisville, Kentucky • Capital support and origination partnerships preserved with preferred partners—Mitsui Sumitomo Insurance Company (MSI) and Hannover Re • Credit established with counterparties and trading commenced Summer 2003 • Over 1500 trades through February 2005 • Continued track record of profitability already re-established • Only specialist weather risk manager to receive independent credit rating---Standard & Poors BBB/A2 with stable outlook November 2004 • Selected as runner-up in the best dealer category in Europe and North America by Environmental Finance, best dealer in Asia with MSI

3. Weather Impacts Most IndustriesValue of Hedging is Becoming Known • Numerous case studies on weather’s impact to various industries written by GW and posted on www.guaranteedweather.com • Industries include: • Major and regional banks have recently entered the market to facilitate their clients management of weather risk • GuaranteedWeather’s data base contains 15,000 locations in 28 countries

4. Americas Update • Increased level of activity on the Chicago Mercantile Exchange, volumes up over 200% year on year, OTC market up substantially as well • WRMA margining protocol to use the 10 year average to calculate and post exposures has been important to facilitating new entrants • Consolidation of cities traded with a focus on CME sites • Higher number of transactions, but smaller in size • Reduction in number and size of seasonal swaps executed, shift to transaction of more swaps on a monthly timescale complementary to commodity strategies

5. Americas Update • Recently significant increase in transactions, much greater depth and increasing size • Last year-majority of seasonal temperature risks transacted were options, now mainly swaps • Energy firms that have exited the market in the last two years have been replaced by hedge funds, insurers or banks with even signs of energy firms returning • Weather to commodity structures adding liquidity and new structuring opportunities

6. Americas Update Market Participants: • Incumbents: GuaranteedWeather, Swiss Re, Ritchie Capital, Constellation, TXU, Hetco, XL Capital and Wolverine (CME market maker). • New Entrants: • Financial institutions-significant interest from hedge funds and financial institutions with Entergy Koch Trading operations being purchased by Merrill Lynch. CSFB is starting a weather and commodity trading operations. DE Shaw, HBK, Pyrenee’s Capital (former XL Weather and Energy) trading weather and commodities, Citadel Capital expected to begin trading. • Specialists-Adverse Weather • Structuring Desks; ABN AMRO, Rabobank and Credit Lyonnais have active structuring desks active in US market.

7. Americas Update • Significant interest in specialized structures such as wind and also precipitation structures for agriculture, construction as well as energy. • Very cool summer in 2004 generating significant interest from electric utilities. • Agriculture becoming a very active area—complementary structure to government crop insurance which is based on 5 year average yield, as yields fall, government protection less valuable and weather is cost effective fill.

8. Americas Update • Intuitive approach gaining footing similar to Japan, day count structures for snow and precipitation. For instance excessive precip at planting or harvest, insufficient in growing period. Similar freeze risk, rain, wind for construction. • This winter, snowfall structures generated interest from both companies burdened by excess snow as well as ski resorts, salt companies and snow removal companies which are damaged by insufficient snow. • OTC Brokers; TFS, Evolution and ICAP/Garban Capital Markets. • Insurance Brokers; Willis, Marsh, Aon and Benfield generating interest.

9. European Update • Seasonal temperature risks transacted as options as well as swaps • Energy firms still active in Europe with Accord/Centrica a major player. Significant interest developing from other energy firms • More summer risk had been transacted by mid February for 2005 than for all of 2004 • Like the US, weather to commodity structures adding liquidity and new structuring opportunities • Market Participants; GuaranteedWeather, Swiss Re, Ritchie Capital, Wolverine (CME market maker) are major incumbents with significant new interest from Innogy/RWE and Pyrenee’s Capital. Cheyne Capital is a new WRMA member and Citadel Capital is expected to begin trading Europe. ABN AMRO, Rabobank, CDC Ixis and Credit Lyonnais have active structuring desks. Interest from Fortis and Royal Bank of Scotland among others.

10. WRMA 2004-6 Strategic Strategic planning session of WRMA board members before London conference. The key outcome was to develop a small number of core strategies along with clearly defined, realistic and measurable action plans to progress them during the next two years. • Active marketing of the weather risk management industry to build awareness and understanding and grow the market (size of the industry) • Creation of a favorable environment for the industry (shape of the industry) • Solid regulatory framework • Standard documentation and characterization

11. 2004-2006 Strategic Plan Deliverables • Marketing committee formed and developing a direct marketing campaign using WRMA volunteers. • First effort is to identify and approach trade associations with a potential interest in weather risk for speaking slots or other means of getting to their members. • Secondly, exhibit at trade shows with targeted WRMA promotional material. Sponsoring a booth at the Risk Insurance Management Society's annual meeting in Philadelphia (April 17-21) to be staffed by volunteer WRMA members. • Re-tool the WRMA website, to make it easier to navigate and more user friendly • Continue the PricewaterhouseCoopers industry survey • Create a master "Weather Risk 101" presentation (housed on the website), badged with the WRMA logo and giving suitable prominence to the association and its aims

12. Press Update • We have had tremendous momentum with coverage from our long time supporter Environmental Finance, as well as in the outstanding January-February 2004 edition of European CEO headlining the outlook for weather risk management. • Energy Risk, Risk Magazine, and Fortune magazine have all generated compelling articles and interest. Regarding the Asian conference, we welcome members of the press and their interest and contributions to the excellent level of articles and coverage.

13. 2004-2006 Strategic Plan • Advocate weather risk management over weather normalization which are effectively weather pass through rate filings. Committee formed and drafted White Paper. On February 1st, WRMA submitted comments to 2 pending cases and we have hired a consultant to continually monitor filings, suggest action and our response requirements. We believe this pro-active effort will be of significant benefit to not only publicizing the availability of weather risk management tools but achieve greater utilization. • Prepare a White Paper on European issues, and particularly on the provision of weather data

14. - 2004-2006 Strategic Plan • Produce a User Guide explaining how to fill out the various standard forms after finishing work on uniform/standard contracts and methodologies. Further work will focus on a) user guides b) explanatory notes (on margin protocol for example), and c) new products as and when they are developed. • Consider “trade missions” in emerging markets such as Asia to advocate a proper regulatory framework as well as documentation. • Please note that a main contributor to the success of these initiatives will be the result of WRMA members volunteering their time and resources. Your board looks forward to a vibrant network of committees and would appreciate your letting us know where you might have a particular strength and interest in participating.

15. Market Education

16. Market Education

17. Golf Course Hedge Don’t let Mother Nature wash away your profits….

18. Golf Course Hedge Premier Golf Course + Good Weather = Profit (The Old Formula) Golf and weather go hand in hand. Many times, weather determines whether a person plays golf or not, and establishes the golf season for a particular geographical region. Golf courses utilize a variety of techniques to minimize the possibility of weather wreaking havoc on golf course profits, but there is no guarantee on when weather will strike. Golf courses may lower weather risk by purchasing weather forecast services, but the accuracy of forecasts can be marginal and the impacts, even if known ahead of time, can still be substantial. Even a perfect weather forecast cannot reimburse lost profits. • Wind – reduction in rounds played • Rain – reduction in rounds played, course damage or reduced playability • Heat – reduction in rounds played, increased irrigation costs • Cold – reduction in rounds played, increased turf management costs GuaranteedWeather’s customized solutions let you decide the exact type of weather protection you need and eliminates weather from the equation. Below is a chart of the historical payout to the contractor.

19. Golf Course Hedge Premier Golf Course = Profit (The New Formula) Location:Choose to cover one course, or several courses in different geographical regions of the world. Period: Choose to cover the entire season, weekends only, individual months, or a weekend tournament. Finances: You choose the level of weather that triggers a payment, the amount of that payment, and the maximum level of revenue protection. Weather Index: Choose the type of weather that impacts your revenue, including: • Total seasonal rainfall • Total weekend seasonal rainfall • # of days rainfall exceeds 0.25”, 0.50”, or 1.0” • # of weekend days with one inch rainfall • Average maximum temperature • # of days temperature is above 35C • # of days temperature is below 8C

20. Snow: Lack of Snow Weather Risk Weather Risk: Snow • Many different industries can see profits suffer during years of low snowfall, as a decrease in snowfall totals decreases demand for their products or services. Salt and deicing chemical companies, snow removal equipment companies, ski resorts, and even clothing manufacturers can find themselves at the mercy of Mother Nature. Fortunately, the ability to implement a weather risk management strategy can reduce the impact of decreased demand to the bottom line.

21. Snow Example Snow Put Option Example: • A put option offers protection for a lack of seasonal snowfall. The buyer pays a premium for the right to collect monies if the snowfall deficit occurs. An example of a put option may resemble the following: • Coverage Period: November 1 through March 31 • Weather Type: Sum of Daily Snowfall • Strike: 35 inches • Tick: $20,000 per inch • Maximum Payment: $500,000

22. Snow Example • With this put option in place, GuaranteedWeather would pay the option buyer $20,000 per inch less than 35 inches, up to a maximum payment of $500,000. If there were 25 inches of snow during the coverage period, 10 inches below the strike of 35 inches, the buyer would receive $200,000 from GuaranteedWeather. The option buyer has now hedged against decreased demand due to a lack of snowfall during the winter season.

23. Agricultural Example-Excess Heat • Certain crops including soybeans are very sensitive to excess temperatures • Excess Degree Day (EDD) new measure for average temperature above 85 F • Excellent offsetting risk for utilities interested in cool summer protection

24. Conclusion • Despite exit of the US/multi-national energy firms, the CME and new and established entrants have substantially revitalized the market • Significant trend and interest on weather and impact on commodities creating new depth and liquidity in US and Europe • WRMA countering weather normalization with advocacy of market solution • The WRMA margining protocol has been an important factor in supporting new entrants

25. Conclusion • WRMA 2004 meetings focusing on financial and trading applications have stimulated strong interest • WRMA.org and www.guaranteedweather.com are excellent sources of weather news and market developments • Barring unforeseen developments, the Americas’ market is once again vibrant with significant opportunities in Europe and of course Asia Brian O’Hearne, WRMA President and Director GuaranteedWeather, President and CEO Bohearne@guaranteedweather.com 913-253-1210 Thank you for your hospitality and consideration!