Extreme weather conditions—and even slight deviations from normal weather—can significantly impact industries such as energy, tourism, transport, construction, retail, and agriculture. In the event of severe weather, the damages incurred are often covered by insurance contracts. Therefore, insurance and reinsurance companies require analytical models to accurately price their policies in alignment with these risks
In cases of minor weather fluctuations without catastrophic consequences, companies can develop their own strategies for weather risk management to better anticipate impacts on production or customer demand. Additionally, financial products such as options are available on the market to hedge against these risks.
With predictive analytics, historical meteorological data can be combined with records of catastrophic events to accurately determine insurance pricing. At the business level, meteorological data can also be correlated with standard activity indicators to better understand the impacts of weather conditions and predict short-term consequences.