Weather Derivatives Are Booming in an Unpredictable Climate
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As the world’s climate becomes increasingly volatile, businesses that depend on predictable weather are turning to financial products that compensate them when there’s a heat wave, a drought or an unusually persistent bout of rain.
Unlike better-known catastrophe bonds, which help to shield insurers against rare natural disasters, so-called weather derivatives offer protection from less severe but more common meteorological events. These contracts help companies to manage risks that may go barely noticed, such as a warmer winter or a rainier summer.