The weather business

The AGCS report on weather risk management, titled 'The Weather Business - How companies can protect against increasing weather volatility,' was a collaborative effort with Allianz Risk Transfer (ART).

The report examines the strong links between unexpected weather patterns and company performance, and explores the solutions that Allianz Risk Transfer can deliver through its weather risk management expertise. A key message from the report is that bad weather is no longer a good excuse for missed sales targets.

A perhaps surprising finding in the report is that annual costs from routine weather variance can triple those from the headline-grabbing global natural catastrophe losses.

According to Allianz between 1980 and 1989, on average $15bn a year was paid out in insured losses for such events around the globe. This has risen every decade to hit $40bn a year on average between 2000 and 2009. Most recently in the three years from 2010 to 2013 alone, $70bn in damages from these weather events has been paid out annually. This last figure counts the cost of 2013’s central European floods which saw heavy rainfall cause damage, resulting in economic losses of close to $18bn, claiming 22 lives.

In 2012 alone, the US suffered 11 weather-related catastrophe events that each caused at least $1bn in damage, according to a study by the Stanford Woods Institute for the Environment.

Meanwhile, the US Department of Commerce estimates 70% of companies are directly affected by the weather with the US Climate Disruption Budget in 2012 totaling nearly $100bn. The federal government spent more taxpayer money on the consequences of the volatile weather activity during 2012 than on education or transportation.

Global economic losses from weather-related events came to about $150bn in 2012, according to Munich Re. However, in addition to the high-profile natural catastrophe events there is also a huge variety of increasingly volatile weather activity, such as changes in temperature and levels of wind, rainfall, snowfall and even the amount of sunshine, which can significantly impact the balance sheets of businesses, even if these only constitute minor deviations from the mean.

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