AGCS warns businesses to wise up to the financial strain arising from everyday weather fluctuations
A lack of strategic risk management around everyday fluctuations in weather activity could put business performance and the economy under real threat, warned Allianz Global Corporate & Specialty (AGCS).
In its recent report on how businesses could protect against increasing weather volatility, the firm predicted that regular weather variation could cost the EU $561bn in one year.
It warned that the direct cost of weather volatility worldwide is increasing, stating that insurers paid out US$70bn globally for damages from extreme weather events every year for the past three years.
However it stressed that the economic impact arising from everyday weather fluctuations far exceeds the already huge sums annually associated with natural catastrophes.
Commenting on the report’s findings, the firm’s risk transfer managing director Dan Tomlinson said that slight fluctuations in weather activity could affect various sectors. Energy, retail, food, clothing, tourism, distribution, transport and construction are “just as sensitive to minor changes in the weather as they are to movements in interest and foreign exchange rates in terms of the impact on profits”.
He said: “Weather risks are polar extremes. The nat cat, headline-grabbing events are what we call low frequency high-impact weather. At the other end of the scale you have high frequency low-impact weather and that’s where you have very regular small deviations.”
Risk management has a key role to play in protecting against such risks, Tomlinson concluded.
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