From this analysis, it seemed clear to Willis that the main source of unmanaged risk was from the weather. For example, the underlying variable determining the payoffs could be one or a combination of weather variables, such as average temperature, rainfall, snowfall, a heat index, or the number of heating or cooling degree days.
I prefer the second approach for the following reasons. For each tonne of shipments, UGG had gross profit of Suppose that the premium for insurance coverage equals expected claim costs plus a 20 percent proportional loading.
If the firm could reduce its weather risk, it could increase the proportion of the firm financed with debt without paying higher yields, which in turn would allow it to gain additional interest tax shields.
The Commission also maintains extensive records of the grain that is shipped from country elevators and from export terminals. In preparation for a meeting with a group from Swiss Re New Markets, Mike and Peter wanted to answer the following questions: Ignoring cost differences, are there any advantages of the insurance contract approach versus the use of weather derivatives?
How could the parties structure an insurance contract to cover the grain volume exposure? Insurance Corporation of British Columbia The six risks were 1 environmental liability, 2 the effect of weather on grain volume, 3 counterparty risk suppliers or customers not fulfilling contracts4 credit risk, 5 commodity price and basis risk, and 6 inventory risk damage to products in inventory.
Peter Tufano, Stuart C. Another potential benefit of bundling is administrative costs and loading costs would be reduced if there are fixed costs for either the insurer or the insured associated with nego- tiating each individual policy. Analysis performed by the authors using data provided by Willis.
The coordination of these activities between farmers and food producers would require an information, storage, and transportation network. Ignoring deductibles and limits, the algebraic formula for the payoff in year t equals Max[0, 0.
Although UGG is a public company, it retains some of its farmer cooperative roots.This Case is about Finance. Publication Date: 01/22/ United Grain Growers Limited is a grain management and marketing company with lift storage capacity in Ontario, Saskatchewan, Manitoba, Alberta and British Columbia.
UNITED GRAIN GROWERS: ENTERPRISE RISK MANAGEMENT AND WEATHER RISK TEACHING NOTE FOR UNITED GRAIN GROWERS (UGG) CASE INTRODUCTION This teaching note on the United Grain Growers’ case provides an overview of the case, suggested answers to the questions at the end of the case, and a brief summary of UGG’s decisions.
We build the fastest, most acclaimed legal information products. With over twenty years of experience managing and publishing legal information, Lexum provides online solutions to producers and users of document collections from all industries.
Access to case studies expires six months after purchase date. Publication Date: February 27, United Grain Growers Ltd. (UGG), a Canadian grain distributor, audited its exposure to a number of key risks, especially the impact of weather on grain volumes and operating income.
United Grain Grower Case Risk Management United Grain Grower Case Risk Management PREFACE United Green Growers (UGG) is a company who provides commercial services to farmers in Canada and markets agricultural products worldwide.
United Grain Growers Ltd. (UGG), a grain distributor from Canada, is being audited for its exposure to a number of key risks, especially the weather impact on grain volumes and operating income.Download