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What is Weather Risk?
As much as 70 percent of all business activity is
affected by the weather. In the late 1990s, innovative trading
companies, primarily in the energy sector, recognized this risk
management opportunity and began offering solutions to help companies
manage this class of natural hazard risk. Structured either as
derivatives or as insurance contracts, weather transactions typically
cover local or regional variations in temperature, precipitation, or
other weather features over a period from one week to a full winter or
summer season.
RMS was first to license modeling technology to
companies participating in the growing weather market. Delivered through
the Climetrix® application, RMS weather models offer comprehensive
real-time and historical weather data, integrated with sophisticated
analytical tools for structuring, pricing, and managing a portfolio of
weather risk contracts.
RMS weather models combine the company’s expertise in
probabilistic modeling and portfolio management with historical,
real-time, and forecast data from Earth Satellite Corporation
(EarthSat), the leading provider of weather data to the energy and
agricultural commodities markets. Together, the companies have developed
a leading-edge set of techniques and algorithms to clean and enhance
historical and daily weather data, providing the most reliable
information for weather risk transactions. |
