Bright forecast for weather derivatives

To attract more corporate end-users, purveyors of weather derivatives are creating new products in search of the perfect hedge, as Catherine Lacoursiere finds

Weather derivatives have experienced a long incubation stage since their introduction ten years ago. But this year, the slow maturation has shot up into healthy growth. From April 2005 to March 2006, the notional value of weather derivatives jumped fivefold to $45.2 billion, according to the Weather Risk Management Association (WRMA). And some analysts are optimistically forecasting a market in the trillions of dollars.

Brian O'Hearne, managing director of environmental and commodity markets at