Why did Allianz develop an insurance product for private households?
Martin Gansneder: One third of private energy requirements is used for heating and hot water tanks. Due to rising energy costs, a change in these requirements has direct consequences for household budgets. If it gets colder in winter, private heating requirements increase, resulting in a larger bill. These unforeseeable but at the same time unavoidable costs confront many consumers therefore with a risk that is difficult to calculate.
For years, institutional investors and companies have been able to insure themselves with weather derivatives against the consequences of such temperature fluctuations. Until now, this has never been an option for private households. Allianz already offers a wide range of insurance products relating to the home and is always trying to expand this product range for the customers. Therefore it suggested itself to take a look at the annually recurring issue of calculating heating and other utility costs. We wanted to develop an instrument for people with lower to average incomes that can compensate for increased energy costs.
Why are companies interested in protecting themselves against weather-related risks?
Protection is worth investing in if the business success of a company is substantially dependent on the effects of the weather. The clearest example is the owner of a beer garden whose revenue is seriously reduced in wet weather - however when the weather is fine, his revenue sees a sharp increase. Weather derivatives balance this effect and the result reasonably normalized. Other sectors, such as the construction sector, energy production or winter sports resorts are even more subject to the whims of the weather. They can even report the derivatives used as a protection instrument on their balance sheets. For retail customers, however, this type of protection is clearly more suitable within the framework of insurance policies.
