New Study Identifies World' Most Weather Sensitive Economies; Global Economy Could Grow by $250 Billion by Hedging Weather Risk
SAN FRANCISCO, Calif. – August 26, 2008 – WeatherBill (www.weatherbill.com) today released a new study ranking the weather sensitivity of sixty-eight countries around the world. The study finds that Brazil is the world's most weather sensitive country and Pakistan the least. The report estimates that if all of the countries included in the study hedged all of their weather risk, world output could grow by as much as $258 billion. For the full study and a summary of findings, visit http://www.weatherbill.com/learn/research.
“In this study, weather sensitivity is defined as the relative potential impact of the weather on a country's economy,” explains WeatherBill CEO and founder David Friedberg. “To measure the potential growth associated with hedging weather risk, we first quantified the weather sensitivity of several countries around the world.”
Weather sensitivity scores are based on daily weather observations spanning as many as thirty years for each country, GDP data by industry sector, and weather elasticity coefficients, which measure the sensitivity of particular sectors to given weather variables. The full study and a summary of the findings can be viewed at www.weatherbill.com/learn/research.
“The United State’s economy has a total weather sensitivity of roughly $2.5 trillion, 23 percent of the national economy,” says Friedberg. “In contrast, Bolivia has a total weather sensitivity of just over $2 billion. That’s 31 percent of the Bolivian economy.”
WeatherBill uses the study’s results to quantify the potential effect of hedging weather risk; first estimating each country's capital-at-risk (CAR) due to weather variability and then calculating how much the country's economy would grow if the CAR, minus a premium, were reinvested.
“With weather coverage, Brazil's economy is estimated to grow by $16 billion, or 2.3 percent,” explains Friedberg. “India's economy could grow by as much as $2 billion, or 2.2 percent. If all of the countries included in the study hedged all of their weather risk, global output would grow by an estimated $258 billion.”
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WeatherBill, Inc. (www.weatherbill.com) provides the only online service that allows businesses to protect revenue and control costs from the impact of bad weather. Founded by CEO David Friedberg and CTO Siraj Khaliq, former members of the Google team, WeatherBill is funded by New Enterprise Associates, Index Ventures, and Allen & Company and is backed by Nephila Capital, one of the world’s largest weather risk and catastrophe reinsurance fund managers.