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Met Office invests in unpredictable weather market

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The Met Office, Britain's government run weather forecasting agency, is investing £500,000 in an e-commerce firm which aims to create a market for trades based on the weather.

Weatherxchange.com, a joint venture between the Met Office and technology partner Umbrella Brokers, will provide information about the weather from European and UK weather centres to traders specialising in weather derivatives.

Unlike conventional weather insurance (which only cover one-off events), weather derivatives are more complex financial instruments which allow firms to receive payments if, for example, there was a sustained cold spell.

By using these instruments organisations like power generators and leisure firms can limit their exposure to weather conditions that might have an adverse effect on their businesses.

The market for weather derivatives is worth around $9bn worldwide but is immature in Europe compared with the US - which is slightly surprising given the well known fixation of the British with our unpredictable weather.

By creating a portal with a comprehensive set of European weather data, the Met Office hopes to stimulate the development of a market for weather derivatives and allow contract settlement times to come down from 80 to five days. ®

External Link

Weatherxchange.com

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