Weather Derivatives

10/25/20

“What are financial products that are dependent on weather conditions?”

Although usually thought of as two independent factors, weather can have a massive impact on finances, whether (pun intended) it be through floods devastating homes or wildfire-prone weather making agricultural insurance riskier. As a result, financial institutions have created a series of financial products known as Weather Derivatives. These can come in many forms, such as changing electricity prices based on weather or looking at long-term climate projections to calculate hurricane insurance.