Betting on the Weather

Parametric weather products offer event organizers improved protection of revenues in an increasingly unpredictable climate.
By: | September 14, 2016 • 5 min read

Apart from an attendee dying, rain is perhaps the worst thing that can happen to a festival,” said Christian Phillips, contingency underwriter at Beazley. “An angry few hours from Mother Nature can cost hundreds of thousands of dollars, dampening profits even for sold-out festivals and negatively affecting on-the-ground consumer spending.”


Christian Phillips, contingency underwriter, Beazley

Yet according the insurance industry, many event and hospitality companies continue to find themselves inadequately covered against losses that could arise from adverse weather, or are unaware of the insurance coverage options available to them.

“A protection gap exists on weather coverage for events companies,” said Tanguy Touffut, global head of parametric solutions at AXA, who believes those buying coverage are in the minority.

“However, increasing weather anomalies as a consequence of climate change, as well as the emergence of innovative insurance solutions such as parametric insurance, are fueling increased demand for such covers from events companies.”

Typically, event organizers must choose between event cancellation coverage — a broad policy that compensates the insured if their event is cancelled for a multitude of reasons beyond their control — or a parametric weather policy that pays an agreed sum if a certain weather trigger is hit, for example, half an inch of rain over four hours.

While the weather policy won’t cover against the wide range of perils the cancellation policy would (such as fire, terrorism or road blockages), it does cover against the lost income from attendees leaving a weather-affected event early. But that kind of loss wouldn’t be covered under a cancellation policy because the event must be cancelled to trigger a payout.


“This presents companies with a tough choice. They usually don’t have the budget for both policies, and weather can be a little more expensive as it is a stated value policy.

“If the client picks the wrong coverage and loses money, they will be upset,” said Marlene Benoit, promotions and events leader for broker Lockton.

Beazley has gone some way to bridge the gap with a new product that is a hybrid of both types of coverage. As well as offering broad cancellation cover, the product also establishes a weather trigger on which it will pay a fixed sum to compensate for lost revenue.

Benoit said she believed other insurers may soon introduce similar products.

“When the industry comes up with something unique in the marketplace, others will follow, particularly when it is well-received and there is demand.”

Number Crunching

Weather observation techniques and data gathering has improved markedly in recent decades, and insurers now have a data bank of at least 30 years of high-quality data as a base for their underwriting.

09152016_6Analytics_Touffut_headshot copy

Tanguy Touffut, global head of parametric solutions, AXA

“Additionally, the capacity to process these data has improved tremendously, which gives us very sophisticated indexes that better reflect the clients’ risk,” said Touffut.

However, gaps in coverage remain.

“We allow the insured to choose a threshold amount of rain at the front end of the policy. However, we can’t cover every eventuality,” said Phillips.

“If they insure against half an inch of rain but it rains 0.49 inches and people still leave their event, there will be a gap in cover.”

“Due to budgeting, companies may choose a threshold that is too high, and when they have a weather claim, it doesn’t hit the trigger mark, so they end up paying for a policy that doesn’t pay out,” said Benoit.

Consumer Data

Indeed, while improved climate data makes weather parametrics relatively reliable, attendee spending behavior is harder to predict.

“We try to bring our knowledge of what we’ve seen in the past to give guidance, but it is still subjective,” admitted Phillips.

If more than one-third of an inch of rain falls, some attendees will normally leave an event, Phillips said, particularly if the rain falls persistently over several hours rather than in a short, sharp downpour. Clients typically stand to lose around 20 percent of their projected revenues from weather-related departures, though this figure could vary depending on the nature of the crowd, he added.

Combining weather data with Big Data on consumer spending habits to model the effect weather has on behavior at events seems an obvious next step to enhance the insurance offering.

Insureds can improve their chances of securing appropriate coverage by delving deep into their own revenue histories. “We ask the client for historical cancellation and revenue data over the longest period possible,” said Touffut.

Combining weather data with Big Data on consumer spending habits to model the effect weather has on behavior at events seems an obvious next step to enhance the insurance offering. However, James Ingham, head of renewables at risk analytics specialist Sciemus, said that in an age when “data is king,” it may be hard to get data providers to collaborate.


“It can be done, but you would need a large provider like Google Public, for example, to host data covering multiple events across multiple demographics and geographies over a number of years in order to give event organizers full confidence in the inferences. You would also need a secure neutral environment to encourage Big Data providers from other areas such as credit card providers to also collaborate,” he said.

Touffut added that as the quality and amount of data and Big Data processing methods continue to improve, “indexes will become more precise and the models used to design parametric insurance products will even more accurately reflect the clients’ risk.”

“Furthermore, as parametric insurance fixes most of the ‘pain points’ of traditional insurance, both from the claims view and from the purchasing view, we expect this type of insurance to greatly propagate and eventually cannibalize some forms of traditional insurance,” he said.

But as Phillips pointed out, it is often only after an events company suffers a damaging loss that they will consider seeking cover. “Someone may have run an event for 30 years and never had a problem, but weather is changing. Companies can’t afford to rest on past weather patterns.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Janet Sheiner, VP of risk management and real estate at AMN Healthcare Services Inc., sees innovation as an answer to fast-evolving and emerging risks.
By: | March 5, 2018 • 4 min read

R&I: What was your first job?

As a kid, bagging groceries. My first job out of school, part-time temp secretary.

R&I: How did you come to work in risk management?

Risk management picks you; you don’t necessarily pick it. I came into it from a regulatory compliance angle. There’s a natural evolution because a lot of your compliance activities also have the effect of managing your risk.

R&I: What is the risk management community doing right?


There’s much benefit to grounding strategic planning in an ERM framework. That’s a great innovation in the industry, to have more emphasis on ERM. I also think that risk management thought leaders are casting themselves more as enablers of business, not deterrents, a move in the right direction.

R&I: What could the risk management community be doing a better job of?

Justified or not, risk management functions are often viewed as the “Department of No.” We’ve worked hard to cultivate a reputation as the “Department of Maybe,” so partners across the organization see us as business enablers. That reputation has meant entertaining some pretty crazy ideas, but our willingness to try and find a way to “yes” tempered with good risk management has made all the difference.

Janet Sheiner, VP, Risk Management & Real Estate, AMN Healthcare Services Inc.

R&I: What was the best location and year for the RIMS conference and why?

San Diego, of course!  America’s Finest City has the infrastructure, Convention Center, hotels, airport and public transportation — plus you can’t beat our great weather! The restaurant scene is great, not to mention those beautiful coastal views.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

The emergence of risk management as a distinct profession, with four-year degree programs and specific academic curriculum. Now I have people on my team who say their goal is to be a risk manager. I said before that risk management picks you, but we’re getting to a point where people pick it.

R&I: What emerging commercial risk most concerns you?


The commercial insurance market’s ability to innovate to meet customer demand. Businesses need to innovate to stay relevant, and the commercial market needs to innovate with us.  Carriers have to be willing to take on more risk and potentially take a loss to meet the unique and evolving risks companies are facing.

R&I: Of which insurance carrier do you have the highest opinion?

Beazley. They have been an outstanding partner to AMN. They are responsive, flexible and reasonable.  They have evolved with us. They have an appreciation for risk management practices we’ve organically woven into our business, and by extension, this makes them more comfortable with taking on new risks with us.

R&I: Are you optimistic or pessimistic about the U.S. health care industry and why?

I am very optimistic about the health care industry. We have an aging population with burgeoning health care needs, coupled with a decreasing supply of health care providers — that means we have to get smarter about how we manage health care. There’s a lot of opportunity for thought leaders to fill that gap.

R&I: Who is your mentor and why?

Professionally, AMN Healthcare General Counsel, Denise Jackson, has enabled me to do the best work I’ve ever done, and better than I thought I could do.  Personally, my husband Andrew, a second-grade teacher, who has a way of putting things into a human perspective.

R&I: What have you accomplished that you are proudest of?

In my early 20s, I set a goal for the “corner office.” I achieved that when I became vice president.  I received a ‘Values in Practice’ award for trust at AMN. The nomination came from team members I work with every day, and I was incredibly humbled and honored.

R&I: What is your favorite book or movie?

The noir genre, so anything by Raymond Chandler in books. For movies,  “Double Indemnity,” the 1944 Billy Wilder classic, with insurance at the heart of it!

R&I: What is your favorite drink?


Clean water. Check out for how to help people enjoy clean, safe water.

R&I: What’s the best restaurant at which you’ve eaten?

Liqun Roast Duck Restaurant in Beijing.

R&I: What is the most unusual/interesting place you have ever visited?

China. See favorite restaurant above. This restaurant had been open for 100 years in that location. It didn’t exactly have an “A” rating, and it was probably not a place most risk managers would go to.

R&I: What is the riskiest activity you ever engaged in?

Eating that duck at Liqun!

R&I: If the world has a modern hero, who is it and why?

Dr. Seuss who, in response to a 1954 report in Life magazine, worked to reduce illiteracy among school children by making children’s books more interesting. His work continues to educate and entertain children worldwide.

R&I: What do your friends and family think you do?

They’re not really sure!

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]