WEATHER RISK MANAGEMENT SYSTEM

• US 20140019197A1
• Filed: 09/18/2013
• Published: 01/16/2014
• Est. Priority Date: 11/02/2009
• Status: Active Grant

• Current Assignee: SnowCast Solutions LLC
• Original Assignee: SnowCast Solutions LLC
• Inventors: Noyes, William E.
• Granted Patent: US 8,924,242 B2
• Time in Patent Office: Days
• US Class Current: 705/7.28
• CPC Class Codes: G06Q 10/0635 Risk analysis of enterprise or organisation activities
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance
• CPC Class Codes: G06Q 50/00 Information and communication technology [ICT] specially adapted for implementation of business processes of specific business sectors, e.g. utilities or tourism healthcare informatics G16H
• CPC Class Codes: G06Q 50/10 Services

Abstract

This disclosure relates to a system for managing financial risk associated with weather-based service contracts, and more specifically, to a system based on the purchase of weather derivatives to select, manage, minimize, and redistribute financial burdens associated with costs incurred from the payment of services related to greater than average weather-based events. An option contract having a tick price, and an associated premium at a fixed strike price is selected at a desired coverage, in one embodiment, the desired coverage is associated with a payout with the associated tick price that covers the base price of performing the service for a nominal weather condition, the premium of buying the option, and the price of performing the services for exceptional weather precipitations of a three standard deviation from the nominal value. If a hedge trader offers this service rather than a service provider, the desired coverage will also cover the a commission for the trade.

Claims

1. A computer-implemented method implemented on a platform for the risk management and cost containment of weather-related services, the method comprising:

connecting a weather risk management system implemented into a computer in data communication to a computer network for the transfer of input information from a weather database and a weather option database to the weather risk management system, wherein the weather risk management system includes a unitary event module for calculating at least a cost at a site in an area, a global module for calculating at least a base price for services at one or more of a plurality of sites taken from the unitary event module, and a hedge assignment module for calculating a tick price and an associated premium for the selection of an option for managing the risk and containing the cost of weather-related services;

entering into the weather risk management system input information from the weather database and the weather option database;

calculating by the unitary event module from the entered input information the cost at the site in the area;

calculating the base price for services in one or more of the plurality of sites from the unitary event module; and

calculating the tick price and the associated premium for the selection of the option for managing the risk and containing the cost by the hedge assignment module.

2. The method of claim 1, wherein the unitary event module includes a sizing data entry interface for entry of data for the at least one site in the area, and the method includes the step of entering data for the at least one site in the unitary event module.

3. The method of claim 2, wherein the unitary event module further includes a calculation module for the determination of a cost per occurrence for weather events at the site in the area for events of increasing importance, and the method includes the step of calculation of the cost per occurrence using the calculation module.

4. The method of claim 1, further include the step wherein the unitary event module imports a yearly estimate from the weather database and calculates the cost of the at least one site in the area.

5. The method of claim 1, wherein the global module includes a correction factor entry, and the method further includes the step of entering into the global module the correction factor.

6. The method of claim 5, wherein the method includes the step of calculating the base price (BM) using:

7. The method of claim 1, wherein the method further includes the step of calculating a strike price at the nominal yearly weather precipitation based on the option selected by the hedge assignment module.

8. The method of claim 7, wherein the hedge assignment module further imports a value for premiums for at least an option contract from the weather option database.

9. The method of claim 8, wherein the method further includes the step where the hedge assignment module iteratively determines a tick price for the option from the weather option database that includes a payout of the base price plus the premium from the weather events database an ultimate coverage.

10. The method of claim 9, wherein the method further includes the step where the ultimate coverage desired is calculated by a precipitation of twice the nominal yearly weather precipitation.

11. The method of claim 1, wherein the method further comprises the step where a reporting module produces a proposal report to a client with a yearly payment as the base price plus the premium.

12. The method of claim 11, wherein the method further includes the step where the reporting module further includes data from a historical pricing module.

13. The method of claim 1, wherein the weather risk management system is implemented via a spreadsheet software, and the computer network is an Internet.

14. The method of claim 1, wherein the data communication to a computer network for the transfer of input information from a weather database and a weather option database is conducted manually by an operator operating browsing different HTML pages on a display of the computer.

15. The method of claim 1, wherein the weather-related service is a snow removal service, the weather database is a snow precipitation database, the weather option database is a snow derivative, the cost at a site is the cost for the removal of snow after a snowstorm, and the base price is the price for snow removal at a plurality of locations.

16. The method of claim 5, wherein the correction factor is a factor selected from the group consisting of clustering and external elements.