By Henry Gale

April 3 - (The Insurer) - Companies are now protecting themselves against price movements for raw materials such as recyclables that are otherwise hard to hedge using insurance, commodity risk management firm ChAI said.

London-based ChAI already provides commodity market intelligence and price forecasts to organisations such as Veolia, Mondelez International and the UK's Network Rail. The company says its new insurance product, ChAI Protect, is already being used by publicly traded firms. It is offering the policy as a managing general agent, backed by A-rated underwriters.

The coverage is available for metals, polymers, forestry products, agricultural and a range of other raw materials, co-founder and COO Marcus Dixon told Parametric Insurer. These include commodities for which the company says hedging has not proved viable.

"In particular, for recycling materials, where it is currently almost impossible to offset price risk, we are delighted to offer a solution that addresses one of the key reasons these materials are not more widely used," said Tristan Fletcher, ChAI's CEO and co-founder.

As well as large firms, the insurance product is also being offered to small and medium-sized businesses. Fletcher said the coverage creates "pricing mitigations that were previously only available to multinationals and speculators through hedging strategies".

Dixon added that the company will consider risks over a wide range of sizes, from tens of thousands of pounds on the smaller end to large multimillion-dollar limits.

For a policyholder to be eligible for a claim payment, an event needs to cause a commodity's reference price to exceed the start price for the coverage, Dixon said. "Payouts are calculated based on the volume insured multiplied by the price movement within the range of cover," he continued, with claimants submitting a proof of loss such as a purchase invoice.

ChAI has agreements with price reporting agencies such as Fastmarkets and S&P Global Insights, allowing the firm to use their published physical prices as a benchmark reference price for the insurance policies.