Can incidence of car accidents be linked to the weather?

by Artemis on October 16, 2009

Here’s a question for those of you interested in the development of new weather risk transfer products. Could something be developed to allow insurance companies who have motor lines to hedge against the risk of increased accidents due to the weather?

It’s widely accepted that poor weather, particularly an increase in rainfall, will cause an increase in the incidence of motor accidents on public roads. It would make sense if insurers could hedge against this risk with an index-linked derivative type product. It’s a similar concept to the old WinCat Hail Coupon product that Winterthur offered to car insurers in Switzerland almost a decade ago .

Perhaps this has been tried before or perhaps such a product does exist? If it doesn’t then surely there is a market for these kinds of products still as a supplement to reinsurance and with a more immediate payout. What do you think?

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