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Weather insurance helps soothe sting of ruined weddings, holidays




The Toronto Star-By Dana Flavelle
Weddings are a big enough gamble without worrying about hurricanes or tornadoes crashing the party.

For $500, you can get cancellation insurance worth up to $30,000 in losses, including photography, wedding attire, presents and even the honeymoon. Or pay $100 for $10,000 in losses.

The policy, called WeddingGuard, also pays out if someone in the immediate family dies or gets sick, or the venue burns down or goes bankrupt.

But the weather protection is the biggest selling point, said Amélie Bérubé-Chanda, manager and underwriter at the Simcoe, Ont., office that services Eastern Canada for Pal Insurance Brokers Ltd.

The company is one of the few specialty firms in Canada that provides cancellation insurance for a wide range of outdoor events, from rock concerts to trade shows to festivals.

“There are so many summer events in Canada that are outside and they’d have to shut down and lose a lot of money if the conditions are extreme enough to cancel,” Bérubé-Chanda said.

This type of insurance is one of several new kinds of protection individuals and companies are buying as the weather becomes more volatile and the cost of protecting themselves declines.

Whether it’s Niagara grape growers, travel suppliers, or major league sports teams, more businesses are looking for ways to hedge their exposure to the elements, according to Don Cyr, an associate professor of finance with Brock University in St. Catharines.

Some are turning to another relatively new product called a weather derivative.

Since 1996, when the now discredited energy company Enron Inc. developed them as a hedge against warmer than expected winters and cooler summers, the market for such financial products has exploded.

From an estimated $500 million in 1998, demand had grown to $45.2 billion by March 2006 and is expected to reach $200 billion within five years, Cyr wrote in a recent research report.

Initially traded on the Chicago Mercantile Exchange, weather derivatives are now available over the counter, making them cheaper and easier for small business and even consumers to buy, Cyr noted.

Local bicycle shops, hair salons, and non-profits such as the United Nations World Food Program, all use weather derivatives to cover themselves against unexpected events, Cyr said.

One of the best known Canadian examples is offered by itravel2000.com. The company announced last week it would offer its weather guarantee for the fifth consecutive year.

Anyone who books winter travel by Oct. 3 will receive their trip free if at least five inches of snow falls on Jan. 1 at an Environment Canada weather station at the nearest major airport.

The company has paid out twice so far, first to customers in Quebec and then in Atlantic Canada, said Brad Miron, the website’s executive vice-president for business development.

In the U.S., worried travellers can now buy weather protection for themselves directly from a website called raincheck.com

Not yet available in Canada, the site will pay out $100 for every day it rains a half inch or more on your vacation.

The cost of the coverage varies depending on your destination and travel dates. But protecting you and your family from inclement weather over the Labour Day weekend in Toronto, for example, costs just $4.

Unlike traditional insurance, this type of “parametric” insurance isn’t based on your actual losses. It’s based on what happens with the weather. The site pays out whether you forfeited tickets to a Toronto FC Major League Soccer game or simply spent the day indoors, as long as it rains more than half an inch per day.

Despite the rising popularity of various forms of weather insurance, a number of major outdoor attractions in the Greater Toronto Area have yet to take advantage of it. Both the CNE and Canada’s Wonderland said they aren’t protected against weather. Nor is the Toronto Football Club.

“We think we’re a great place to come even when it’s not so nice outside. We have lots of fun stuff to do under cover,” said CNE general manager David Bednar.

As for WeddingGuard, it has yet to pay out this summer despite some pretty inclement weather. “It’s a pretty special day. You’re going to try really hard to make it work.”

Oh, and by the way, there’s one kind of chill it doesn’t cover, a change in heart, Bérubé-Chanda says. “A lot of people ask about that.”



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