Weather – the small events can add up to more than the catastrophes

Volatile weather activity is increasing around the world with recent major events, such as typhoon Haiyan in the Philippines or flood Cleopatra in Sardinia. Yet, while extreme events may capture the headlines, minor fluctuations in weather can have even bigger impacts on business, according to a new report.

In its new report ‘The Weather Business – How companies can protect against increasing weather volatility’ which focuses on the growing importance of weather risks for businesses, industrial insurer Allianz Global Corporate & Specialty SE (AGCS) highlights the economic impact of fluctuating weather conditions and how companies can protect themselves, using new approaches to ‘weather risk management’.

According to the report, the economic impact of increasing everyday weather volatility far exceeds the already huge sums annually associated with natural catastrophes. AGCS estimates that the impact of routine weather variation on the European Union’s economy could total as much as £346 billion (€406bn/$561bn) a year. As a comparison, during 2012, there were 905 natural catastrophes worldwide, 93% of which were weather-related disasters, costing US$170 billion.

In the UK, retail is one sector which is heavily exposed to poor weather, especially in the all-important pre-Christmas period when retail footfall traditionally increases by nearly 40%. An analysis of stock market announcements this year shows 17 retailers and consumer goods companies blamed the rain and snow for their financial performance not being as good as expected. Other sectors which can be badly affected in the UK include the agri-food industry, construction, distribution, energy, tourism and transport.