Below please find a press release from the Weather Risk Management Association discussing their recent survey of the Indian Weather Risk Management Market.
MIAMI, FLORIDA (May 12, 2010) – The Weather Risk Management Association (WRMA) released an industry survey of the Indian Weather Market today at its 12th Annual Meeting in Miami, Florida. The survey finds that the Indian weather risk management market could see major growth in several sectors with a total potential notional value of $2.35-billion (Rs. 105-billion) over the next two to three years.
The survey was conducted for WRMA by Weather Risk Management Services Ltd. India. The agricultural sector is a major contributor to the Indian GDP. With its high risk exposure to weather, agriculture has the biggest growth potential of all the sectors. Last year, the weather risk market for agriculture grew four-fold due to the huge growth in weather insurance linked to farmers with outstanding loans. The market rose from $22-million in 2008-2009 (Rs. 1-billion) to $100-million (Rs.4.5-billion) in 2009-2010. Subsidized weather insurance accounts for 95% of the market.
The survey estimates that Indian farmers and banks could become a notional $2.2-billion (Rs. 98-billion) market over the next two to three years. In five years, the weather risk market for agriculture is expected to rise to $7-billion (Rs. 314-billion) and could reach as $20-billion (Rs. 896-billion). Whether this growth materializes depends on government policies regarding weather derivatives. There’s great interest in weather risk management tools by the renewable energy sector to offset the impact of weather on wind, solar and hydropower. The renewable energy market’s use of weather risk tools is expected to grow to $1-billion (Rs. 44.8-billion) over the next five to seven years.
In the travel sector, airlines are often grounded due to winter fog.The survey forecasts that travel sector use of weather risk tools such as fog insurance could grow to $25-million (Rs. 1.1-billion) over the next five to seven years.
“The concept of using weather risk management tools is being accepted by more and more organizations around the world,” says Sandeep Ramachandran, WRMA board member and Director, Property and Specialty at Swiss Re. “WRMA’s Indian Weather Market Survey shows how these risk mitigation tools could benefit several important sectors of the Indian economy, especially the agricultural sector which is heavily dependent on the outcome of the monsoon season. Using weather risk management tools, the weather’s adverse impact on the these sectors can be mitigated.”