1. W Geneva December, 2007 World Meteorological Organization Basics of Weather Risk Management

2. W 2 General Weather and Extreme Weather General weather also causes economic loss

3. W 3 Risk from General Weather Adverse General Weather –Temperature –Precipitation –Wind speed –Other measurable weather variables Can affect –Costs –Revenues –Margins of Government, Commercial and NGO entities.

4. W 4 Example General Weather Risk Program Warm Winter means Poor Sales of Gas for Heating

5. W 5 Example General Weather Risk Program Outline Example Program BuyerNatural Gas Distribution Utility CoverageLoss of Revenue resulting from adversely warm winter weather. Weather RiskAverage Temperature November-March Weather StationCity Airport WBAN _____ Period1 November 200Q – 31 March 200R AttachmentAverage Temperature > 43.6ºF PaymentUS$250,000 for every 0.1ºF above the attachment, to a maximum payment of US$ 7,500,000 PremiumUS$xxx,xxx

6. W 6 Example General Weather Risk Program Example Program Manages Warm Weather Risk

7. W 7 Example General Weather Risk Program Hypothetical Outcome of Example Program

8. W 8 Management of General Weather Risk General Points: Based on volumetric relationship between adverse weather and adverse economics Parametrically structured: based on measurable weather variables (index-insurance or physically based derivative) Respond to current weather conditions in relation to historical weather data

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