Weatherwatch: In need of protection?

http://www.guardian.co.uk/news/2013/jan/04/weather-insurance-storm-flood-drought

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So you have fixed up your skiing holiday, but what if the snow fails to materialise and you spend a week looking at grassy pistes instead? Should you have bought a weather derivative to offset the disappointment of a dull holiday?

Weather derivatives are financial instruments, purchased to reduce the risk of financial loss due to the wrong kind of weather. Farmers buy them to hedge against a poor harvest. Theme parks and event organisers use them to insure against rainy summer weekends, and power companies purchase them to smooth their income, in the event of, say, a warm winter.

Around four decades ago insurance companies started listening carefully to climate scientists, to quantify the risks posed by climate change and accurately price the products they sell. Weather insurance is now big business. A recent study published in the journal Science has calculated that, when adjusted for inflation, weather- and climate-related insurance losses have more than doubled each decade since the 1980s. Today an average of $50bn is paid out every year, to repair the damage from storms such as hurricane Sandy, or mop up the mess after a flood. This is driving climate change mitigation and adaptation strategies, such as building more energy-efficient or flood-proof homes.

According to climate models, weather extremes will become more frequent, so more of us are likely to be insuring against the weather disrupting our lives.