Another winter storm is beginning to impact Europe today. France’s west coast has been subjected to winds of 100kph and Paris is forecast to face winds of up to 120kph through the night (75mph). It’s not looking to be quite as severe as the storm of two weekends ago but the severity of the weather recently really does highlight the need for alternative risk transfer and weather risk management mechanisms.
Particularly of note is the fact that Paris has closed both of it’s airports for the night due to the high winds forecast. Ferries are also affected with many cancellations. Weather events and cancellations such as this cost transportation companies in a number of ways, compensation claims, costs associated with planes/boats/trains which get stuck in the wrong locations, clean up costs for flooding and debris and lost revenue. Air France have had to book over 1,000 hotel beds for their passengers who are stuck in Paris with no chance of getting on their connecting flights tonight.
Insurance policies cover most of these occurrences but never seem to offer quite the flexibility of a good weather risk management or hedging program, especially for the more severe and less frequent weather events. Market participants would be advised to take note and develop products that will protect the bottom line for corporations likely to be impacted in weather such as this.
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