In this episode of SmarterMarkets™, Dave Greely interviews Theresa Kammel and Pierre Buisson from Munich Re about weather derivatives and their increasing importance in managing weather-related risks amid climate change and the energy transition. They discuss how weather derivatives are financial instruments that pay out based on an underlying weather index, helping clients in energy, agriculture, and other sectors manage risks like temperature, precipitation, and wind variability. Pierre shares his journey from energy and climate negotiations to energy trading, highlighting the underestimated volume of weather risk and the shift from demand-side to supply-side risk management. The conversation explores the sophistication of weather derivatives, the education of clients on these tools, and the potential for these derivatives to de-risk renewable energy projects, making them more financeable. They also touch on the expansion of the weather derivatives market in terms of perils, geographies, and complexity, as well as the increasing frequency of trades.
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