Does geographic diversification decrease weather risk?

April 2016

Insurance is absorbing only a fraction of the economic impacts of terrorist attacks

Given our forecast-oriented society, managers are under intense pressure to meet (and exceed) business forecasts. Much attention is given to dramatic, sudden events—catastrophic events—as the primary driver of missed forecasts. However, little attention is given to a seemingly innocuous driver of missed forecasts: non-catastrophic weather events. Often it is an unpredictable and gradual series of events that send forecasts awry. Furthermore, too many businesses retain excess noncatastrophic weather risk and mistakenly believe that geographic diversification reduces this risk—when in fact it amplifies it. We believe a bespoke weather product offers corporates a solution to transfer their non-catastrophic weather risk.


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