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Doing something about weather: weather derivatives have helped companies control financial risk for nearly a decade. Now that they're trading on a mercantile exchange, sales are really taking off.
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Best's Review
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April 1, 2006
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Copyright informationCOPYRIGHT 2006 A.M. Best Company, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Key Points
* New financial instruments that hedge weather risks dramatically spurred sales of weather derivatives last year.
* Large reinsurers and other financial institutions play a major role in creating weather derivatives.
* Trades on the CME may increasingly shift weather risk from insurance companies onto capital markets.
Everybody talks about the weather, but nobody does anything about it, as Mark Twain allegedly said. But that is no longer the case.
Today, experts from various disciplines have measured, commoditized and monetized the weather. The result has been a booming market the past year in weather derivatives, a risk-management product. And ...
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