We quantify the potential reduction of risk in practice that is possible by constructing a portfolio of contracts covering weather risks, relative to a portfolio of lower-frequency natural catastrophe risks. First, we illustrate a protection seller’s analysis and reservation price for individual weather risk contracts during a winter period of underwriting. The objective is to earn a requisite return on capital on behalf of the protection seller’s investors while meeting the risk management objectives of the buyer. We use Monte Carlo simulation to compare portfolios of these contracts and observe how optimizing the portfolio can reduce risk and the potential combined cost of the weather risk transfer contracts. Although both weather and natural catastrophe portfolios can be diversified by peril geography and type, we note that additional diversification can be achieved in weather portfolios along the dimension of peril direction due to buyers’ interests in taking opposite sides of weather indices. This is evidenced by our calculation of negatively correlated payouts of weather contracts, something that is harder to achieve for payouts of natural catastrophe contracts. We show that risk reduction of a portfolio of weather risk transfer contracts could potentially exceed that of a portfolio of diversified lower-frequency natural catastrophe contracts. This could enhance the risk-adjusted financial performance of protection sellers. These findings imply that protection buyers, including the most vulnerable organizations and people, could experience lower risk premiums, making weather risk transfer more affordable.

相对于低频自然灾害风险的投资组合，我们通过构建涵盖天气风险的合同组合来量化实践中可能降低的风险。首先，我们举例说明在冬季承保期间，保护卖方对个别天气风险合约的分析和保留价格。目标是代表保护卖方的投资者获得必要的资本回报，同时满足买方的风险管理目标。我们使用蒙特卡罗模拟来比较这些合同的投资组合，并观察优化投资组合如何降低风险和天气风险转移合同的潜在组合成本。尽管天气和自然灾害的投资组合可以根据灾害的地理和类型进行多样化，我们注意到，由于买家对采取天气指数的对立面的兴趣，可以在沿危险方向维度的天气投资组合中实现额外的多样化。我们对天气合同的负相关支出的计算证明了这一点，这对于自然灾害合同的支出来说更难实现。我们表明，天气风险转移合同投资组合的风险降低可能超过多元化的低频自然灾害合同投资组合的风险降低。这可以提高保护卖方的风险调整财务业绩。这些发现意味着保护购买者，包括最脆弱的组织和人员，可能会经历较低的风险溢价，从而使天气风险转移更容易负担。