Weather Derivatives

Reduce your financial exposure with innovative weather risk transfer solutions.

Over two-thirds of the world's economy is impacted by meteorological conditions. As climate change progresses, unpredictable weather events such as exceptionally mild winters, cool summers, and periods of sustained high or low wind are becoming more frequent.

Managing weather risks made simple

Our tailored weather-related risk management solutions help companies in all industries that are affected by non-catastrophic weather. With weather derivatives, you receive financial compensation in the event of adverse or suboptimal weather conditions. This also applies if no damage occurs. Plus, there is no need for a lengthy claims settlement process.

Using weather derivatives is the frictionless, practical way to target weather-related risks as part of the overall risk management strategy.

Benefits of Weather Derivatives

Key elements of Munich Re's weather derivatives

Predefined parameters – A “weather index” is defined to represent the underlying weather risk exposure. The weather index can be based on various meteorological variables, such as temperature, wind speed, precipitation, streamflow, solar irradiation, etc. Weather derivatives can be structured to offset a specific portion of the overall weather risk exposure, e.g., protection against a 1-in-4 year event versus a 1-in-10 year event.
Individual structuring – There are various risk management tools/strategies available, including all “standard” derivative products (Swaps, Calls, Puts, Collars, etc.). Dual Trigger products are also available. Generally, these would incorporate a commodity price component along with the weather-based component.
Payout – Like a regular (price-based) derivative, a weather derivative payout is triggered if the specified weather index is above (or below) the pre-determined threshold. Example: You will be paid X euros for every degree Celsius that the temperature is above threshold Y.

Transfer your weather risks to a trusted expert

For over 10 years Munich Re has been the market leader in the offering of weather risk management solutions. We not only have a proven reputation in weather derivatives and (re)insurance but our team members also have renowned international professional experience in energy commodity trading and meteorology. This uniquely positions us to meet the business needs of our clients. We work with them to deliver best-in-class solutions in constantly changing market environments.

FAQ (Frequently Asked Questions)

I do not know how to assess the extent to which my business is affected by the weather. What can I do?

Feel free to contact us, and our experts can help you assess your exposure. We can provide transparent analysis of the risk at hand to help guide you toward the appropriate structure that matches your needs.

What is the difference between a weather derivative and an insurance contract?

The payout from a weather derivative is based on a “weather index”, e.g., the average recorded temperature on a given day. No proof of loss is required (as is the case with traditional insurance products). However, in certain situations, weather risk-transfer solutions can also be structured as a (re)insurance product.