Swiss Re Insurance-Linked Fund Management

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March 2012 was the warmest on record in the U.S.


Here on Artemis we often discuss the vagaries of the weather and climate and this March was certainly an unusual month worth commenting on. The U.S. saw the warmest March on record since 1950, based on natural gas weighted Heated Degree Days (GWHDDs), according to an MDA EarthSat Weather press release. As well as breaking records for warmth in the U.S., March 2012 was the third warmest on record in the UK according to the Met Office.

In the U.S. the monthly total of gas weighted Heating Degree Days for March 2012 was 387.02, well below the previous record of 525.09 from 2007, and averaging 38.0% less than the 30 year normal (625.98) and 37.5% less than the 10 year normal (619.90). The lower the heating degree day number the warmer it has been. For HDD’s to have been so low in March it just shows how much warmer than normal the month was.

Unusually warm weather in the winter will have been welcomed by some weather risk market participants and not by others depending on which side of the hedge you need to be to smooth your business earnings. Businesses who depend on colder winters and springs to make more money (such as energy and heating oil companies) may well have collected on weather hedges which protected them against warmer than average temperatures in March. Meanwhile businesses who prefer milder weather may have had weather hedges in place to protect against a cold spell and that money may now be lost.

Of course there is just no predicting the weather, after the third warmest March on record the UK today is seeing snow and temperatures as much as 50 degrees fahrenheit lower than were experienced a week earlier in some locations. The U.S. is forecast to see the warmer than average weather move further west in April, but overall the month is expected to be much closer to the long term average in terms of temperature.

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