High frequency of unusual weather poses serious threat to corporate’s finances

Unusual weather is becoming more frequent and poses a significant risk to corporate balance sheets, according to AXA Corporate Solutions global head of parametric insurance, Tanguy Touffut.

Up to a quarter of a firm’s revenues can be significantly affected by weather anomalies, which have become increasingly common in recent years and, in many cases, outweigh the risk of a natural catastrophe, says Touffut.

He said: “There exists public awareness on climate change. It is a fact that we have seen a higher frequency of weather anomalies throughout the world over the last few years”

“Based on the latest weather data available, last winter (13-14) was the wettest in the UK since 1776, one of the coldest in the North East of the US with record-breaking temperature lows, and one of the second warmest in France since the 1900s.”

Certain sectors, such as energy, hospitality, retail and aviation have a more sophisticated understanding of their weather risk exposures, but many firms remain unaware of the impact unusual weather can have on their business, Touffut said.

““Up to a quarter of companies’ revenues could be dependent on weather anomalies. We need to make our clients aware that solutions do exist to smooth their earnings and protect their balance sheets.”

Recent advancements in technology have enabled meteorologists to forecast weather with greater accuracy, which can help businesses plan for unexpected weather. Furthermore, Touffut said using Big Data can help businesses analyse the effect of weather changes on their revenues and make strategic decisions to mitigate their losses.