Insurers have paid out $70bn globally for damages from extreme weather events every twelve months for the last three years, Allianz Global Corporate & Speciality has revealed.
In its Weather business report, published yesterday, the insurer said while extreme events could capture the headlines, such as the recent typhoon Haiyan in the Philippines or Cleopatra flood in Sardinia, 'minor fluctuations in expected weather can [also] have big impacts on business performance across a wide range of industries'.
But despite these losses, many UK businesses are still failing to identify the link between climatic conditions and their own revenue streams, Allianz said.
Karsten Berlage, global head of weather risk management at AGCS subsidiary Allianz Risk Transfer, said: 'However "bad" the weather is, it is no longer a good excuse for disappointing earnings. Stakeholders are increasingly aware of this. While companies cannot be expected to control the weather they are now expected to better control the risk of its financial impact. This can be achieved through weather risk management solutions.'
AGCS said weather risk management for businesses offered a new avenue for companies to create customised responses to specific variables which can affect their business.
Berlage added: 'Weather will increasingly be viewed as a core risk to business performance. Therefore, demand for weather risk management solutions should grow significantly in the future with stakeholders able to reap the benefits of better cash flow stability, more accurate budget management, greater earnings consistency and higher risk-adjusted returns.'
AGCS found that weather risk management products are already widely used in the US. In the UK, and elsewhere in Europe and other parts of the world, the product is still emerging.
Elsewhere, in the report it estimated that the impact of routine weather variation on the European Union's economy could total as much as £346bn a year, compared to 2012 when weather-related disasters cost the European Union economy £104bn.