The transfer of weather risk faced with the challenges of the future

Climate change, combined with an expanding risk universe, has led to a significant rise in the frequency and amount of claims paid by insurers and reinsurers over the past three decades. Major 21 century challenges, such as adapting to climate change, food security, and the development of renewable energy, have turned the spotlight on the ties that bind man to his environment. At the end of the 1990‘s, a new market emerged to enable weather-sensitive players to protect themselves from weather hazards: the weather derivatives market. The exceptional reach and significant consequences of the financial crisis that hit industrialised countries in 2008 have led to greater awareness of the role of risk management in business and, consequently, have reaffirmed the necessity of a weather risk market. At the interface of finance and insurance, weather derivatives are bringing to light a new risk transfer model, in which reinsurers are destined to play a leading role.