Reading the news lately you would be forgiven for thinking that the weather risk management industry isn’t doing enough to promote its services. Recently there have been many items in the press discussing loss of earnings due to inclement weather and as we all know this should be avoidable now that you can smooth your earnings using weather risk management tools.
The latest industry to announce its suffering at the hands of the weather is the Japanese ski resort sector. For the second year running resorts have had to delay opening, sometimes by weeks, or run at reduced capacity due to a lack of snow (a fundamental need of a good ski resort).
In some areas of Japan the temperatures have been 2 degrees higher than average and this has lead to much lower than average snowfall. One area has said that it only has 33% of the usual amount of snow for this time of year.
This is where the weather risk management industry needs to step in. Weather risk products for lack of snowfall have existed for years now and it’s the job of the weather risk management industry to promote these products and make sure industries know what they can do to smooth their earnings when the weather is volatile.
Cost may be a factor as weather derivatives deals are not cheap to transact. This is where we need more innovative companies who can create easily understood, index-linked weather risk policies for end-clients and then assume the risks and offload it using derivatives themselves.
To be honest I’m surprised to be writing these types of articles still. The weather risk management industry is surely mature enough by now to be able to offer business owners a way to manage these risks?
What do you think, we’re interested to hear your comments below.