23.5.2011
By Simon Miller
Customised weather derivative products grew by nearly 30% over the last year while the overall market increased by 20% according to figures from the Weather Risk Management Association (WRMA).
The notional value for OTC traded contracts rose to $2.4bn (£1.47bn) in 2010-2011 while the overall market grew to $11.8bn.
Worldwide temperature contracts remained the most traded customised weather hedge with growth also being seen in rainfall, snow, hurricane and wind contracts.
Demand from the energy sector saw a small drop in end-user enquiries to 46% from 54% while construction end-users increased their enquiries into weather risk products from 7% in 2009 to 23% in 2011.
According to WRMA, the growth was representative of increased end user participation from a wider variety of industries such as agriculture, construction and transportation. Geographically the number of contracts traded rose in North America, Asia and Australia with Europe posting the biggest gains.
"The growth in the customised weather derivatives market shows increasing participation from a wide variety of end users who recognise the value of actively managing their weather risk," says Bill Windle of RenRe Energy Advisors and WRMA president. "The increased balance between the exchange-traded market and the OTC market demonstrates a greater interaction between market participants which creates a strong platform for future growth."
The WRMA survey conducted by PwC runs from 1 April through to 31 March of the following year in order to capture the the complete winter and summer seasons.
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