Finance and Insurance

Extreme weather events such as excessive rainfall, storm, hail and drought cause significant financial losses. The number and intensity of extreme weather events are expected to increase due to climate change. This has large implications for the insurance sector, as the damage caused by extreme weather events will likely increase and they have to pay out more to their customers. As a response the insurance premium can increase, or the insurance company decides that certain damage is not insurable anymore in a changing climate. This has large implications for the vulnerability of individuals to climate change. A specific group that is vulnerable to extreme weather events is farmers. They can experience large agricultural losses due to extreme weather. Weather Impact can help in mitigating these climate risks.

Mitigating risks by early warning

In order to mitigate risks due to extreme weather, individuals can take preventive measures by informing them timely about the risks. Weather Impact has developed a real time alert system that support our clients to mitigate risks from extreme weather events. We provide:

With these real time alerts individuals can take preventive measures to reduce the risks of extreme weather. For example one can check it’s house for loose furniture or park his/her car not close to a tree to prevent storm damage caused by falling trees. This type of weather information can also help farmers to make vital farming decisions. A farmer can for example decide to harvest their crops earlier when extreme weather is expected or plant a drought-resistant crop if they know the season is expected to be dry.

Parametric insurance

A traditional insurance is based on payout of actual losses. It works on the principle that when an individual has damage caused by extreme weather, he/she contacts the insurance company. They will measure the plausibility and will pay out. For smallholder farmers in developing countries this traditional system does not work efficient. In these countries they often make use of parametric insurance (also called index-based insurance or micro insurance). This kind of insurance is based on automatic payout when a certain event has happened, regardless the actual individual damage. Weather is an important factor in allocating the risks, as weather is directly connected to agricultural production losses.  For example, a farmer can lose his/her yield due to excessive rainfall or is reduced due to drought. The insurance company monitors these type of weather events by weather observations and satellite imagery and has an automatic payout system. Weather Impact delivers the weather component for parametric insurances. We can do climate analysis on which thresholds to choose and we also deliver operational weather services to monitor the exceedance of thresholds for each location.

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