24 May, 2001: Met Office: WeatherXchange.com launch release
The Met Office has embarked on its first ever joint venture with the private sector to drive forward the untapped weather risk management market in Europe – a market that is estimated to be worth in excess of $9billion in the States.
A comprehensive new online trading service, WeatherXchange.com is being hailed as the premier European e-commerce weather source covering all aspects of weather data, weather risk management and forecasting.
It’s set to keep the European weather derivatives market one step ahead of its counterparts on the continent and change the way businesses plan - from clothing retailers keen to avoid a glut of unsold goods through to the leisure groups whose balance sheets have traditionally fluctuated with weather temperatures.
Amanda Green, (Title) at the Met Office, described the link up as a unique union of business and science and the first relationship in the UK between financial markets and accurate weather data provision. Met Office expertise is being backed by a £500k investment.
Said Green: “Up to 70% of UK companies alone are exposed to some degree of weather risk. Weather risk management has the potential to be big business here as the climate throughout the world becomes more erratic. We’re hoping to educate companies about the derivatives market so that they can more confidently hedge their exposure – and this in turn should benefit the economy as a whole.”
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Key to the new venture is the Met Office’s partner, Umbrella Brokers Ltd, run by Cindy Dawes and co-director Alistair Stacey, who have both been involved in derivatives for nearly 20 years. They approached the Met Office several months ago because of the Government agency’s reputation for providing the most accurate data on forecasts and weather conditions across Europe.
Dawes, who in December 1999 set up the first working party in Europe to look specifically at the problems and issues hindering the development of the weather derivatives market said: “The derivatives market has been slow to take off in Europe compared to the USA where the market is well established. The trouble is that in Europe there’s been no central supplier of standardised data – and data is the key element to the pricing of weather exposures that allow traders to create products to cover their clients risks..
“Many countries have their own measurements and characteristics of the definitions of weather data. Some countries do not have long enough historical records or the quality of the data needed which has meant that pan-European companies have not been able to cover their exposure adequately.
“We saw the Met Office as being the only data supplier in Europe which could offer a central supply of clean, quality controlled and uniform data - data which, most importantly, can be accessed immediately via the Internet platform. ”Having instant access means industry and commerce will be able to price their weather exposure more efficiently”
In the future the joint venture aims to help develop the liquidity on the indices and products it is creating through the setting up of teams of brokers who will market and help raise awareness of weather risk management .This aspect will be helped through the provision of educational courses, seminars and tutorials on data and weather risk management for all industries.
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The Met Office holds a 50% equity share of the new enterprise, and all profits go straight back to the taxpayer. Umbrella Brokers owns a 25% share and the remaining 25% share is reserved for future partners or funding.
Cindy Dawes and Amanda Green are available for interview
Media Contact: Sarah Graham or Chris Lawrence on 020 7379 0304
Met Office Press Office contact: 01344 856655