NextWeather indices are on line at www.euronext.com (click on indices and statistics then weather indices). Designed for professionals in business sectors dependent on weather conditions, they are a reliable daily reference that allows users to factor the impact of the weather into their operations.
NextWeather currently counts 6 weather indices for France - five regional and one nationwide. Regional indices are based on the average temperature recorded each day in five cities representing the 22 regions in France: Ajaccio (Corsica), Bordeaux, Lyon, Paris-Orly and Strasbourg. The national index(1) is based on the average temperature for continental France each day.
To ensure index accuracy, Météo-France also uses temperatures collected every three hours by its core observation network, which includes 525 weather stations. Gross data are processed and corrected to eliminate variations not linked to the climate. The Météo-France Weather Service completes validation in under 48 hours, generating reliable figures for index calculation.
In the medium term, Euronext plans to launch derivatives contracts based on its temperature indices. These will give insurance companies, banks and businesses in weather-sensitive sectors a means of hedging against the impact of temperature swings on their operations. As a regulated market, Euronext will guarantee, through its clearing entity Clearnet, full completion of transactions in the event of default by a participant. Technical expertise from Météo-France will be essential in calculating indices and contract values.
Demand for weather derivatives is expected to rise given the extreme sensitivity of a wide range of businesses - farming, retailing, energy, leisure and tourism, construction and textiles, to name only a few - to changes in temperature and climate. From 1999 to 2001, trade in OTC weather derivatives represented around USD 75 million in Europe and some USD 7 billion in the United States. Worldwide, it is expected to reach USD 70 billion in 2005.
Météo-France and Euronext are currently looking into extending the NextWeather concept, first to the Netherlands and Belgium and subsequently to other countries, with a view to offering Europe-wide coverage.
