Weather variations could cost U.S. economy $534B per year: Analysis
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While businesses often are aware of catastrophic weather risks, they pay less attention to how routine weather variances can affect their bottom line and to managing those exposures, a report says.
The analysis released Tuesday by Allianz Global Corporate & Specialty S.E. said routine weather variance could cost the U.S. economy as much as $534 billion per year, with the U.S. Department of Commerce estimating that 70% of U.S. companies are directly affected by the weather.
Minor weather variations can significantly affect a variety of businesses, including the energy sector, travel and transportation, construction, food and beverage, municipalities and the retail sector, the report said. For U.S. retailers, inclement weather can affect business during the shopping period between Black Friday and Christmas.
“Traditionally, companies were of the opinion there is nothing they can do to combat the negative effects of the weather,” but various products now available in the weather risk management market provide tools for organizations to address those exposures, Allianz said in the report.
The availability and accuracy of historical data has been a critical component in advancing the weather risk management market, according to the Allianz analysis. Shareholders, analysts and rating agencies are becoming increasingly aware that companies can manage their weather-related exposures.
“While companies cannot expect to control the weather, they are now expected to understand the impact of it on their business in order to make an educated decision how to insulate unwanted weather risk to better control the risk of its financial impact,” the report said.
The Allianz analysis, “The Weather Business — How Companies Can Protect Against Increasing Weather Volatility,” is available http://www.agcs.allianz.com/about-us/news/art-weather-report here.
