Policy

State regulation

As explored on the Culture page, the CEO of the firm held strong beliefs in favour of a highly market driven economic system.

Concern was voiced around any form of compulsion from the state with regard to economic activity, as was criticism of recent developments in the regulatory frameworks impacting upon financial services:

“The clamping down that we’re seeing on speculative trading, and many, many banks have pulled out of trading important world commodities because they feel demonised. This is not a constructive move, it probably does far more harm than good.”

This individual believed that the state should be focused on the development of a robust infrastructure that could support market growth. In relation to weather risk markets, he argued this state activity should be focused on public data provision and regulation of the indexes of data underlying the financial markets:

“Okay, so there’s evidently the problem of what happens if that index is fiddled. So there’s recently a paper that was put out by one of the EU bodies talking about index providers and the scope of that specifically mentions weather data as an index, which of course is exactly what we do. So it’s quite possible that what we do becomes regulated. And we’d be delighted it speaks to the approach we take anyway of openness, consistency, quality, and auditability.”

Public infrastructure

It was strongly felt that a publicly funded infrastructure – from roads to weather data – should be made available for exploitation by commercial interests free of charge:

“The very first thing they should do is to stop tolls on bridges. And if they get that then open data will come [laughter].”

Whilst some have called for the privatisation of parts of the UK’s public data infrastructure, including trading funds such as the Met Office, it was argued that this would not be appropriate:

“Should it be privatised? The answer is no, I mean I think, I’m essentially a Thatcherite, but I think there are limits to the scope of privatisation. And whenever you see an infrastructure good I have great doubts that you can move that infrastructure’s good service to a private environment because of the artificial nature of creating competition.

“Provision of meteorological data in a nation is an infrastructure good in the same way, so therefore it’s a public good and should stay in the public.”

“It would never become open if it were privatised.”

Open data

In order to overcome barriers to acquiring data, the firm looked to the USA and some European countries as exemplars of good open weather data practice:

“So the obvious example is the US. The US realises that what it loses in not charging for data it gains through the increased economic activity that follows the free availability of that data. And so many companies in the US exist because that data is free, that you do not see in Europe.”

“Simply copy the model of other nations in Europe that have moved to an open policy. And that involves, firstly a policy decision that data should be freely available because the economic benefit transcends the modest amount of money that might be charged otherwise. But also it requires the practical side of it, data delivery, you know you need a way to get at it.”

The firm only had limited awareness of the Met Office’s open data DataPoint service, believing it was too limited to meet their needs:

“Yeah. I think I have come across that [DataPoint], but that’s not something we use, no. Okay, so if that were to be broadened.”

The firm’s knowledge of the government’s open data initiative was claimed to be limited:

”It’s not an area I feel qualified to comment on. I don’t know enough about political policy in those areas.”

Lobbying policy makers

Despite these strong political beliefs, the CEO stated that the firm did not engage in lobbying of policy makers:

“No. No it’s not worth it. We’re not a big enough organisation to have any sway.”

Industry level bodies such as the Weather Risk Management Association (WRMA) were also claimed to be relatively inactive in their lobbying efforts:

“They [WRMA] have lobbied in Washington on a couple of areas, but not outside of the US.”

Instead, the role of the WRMA was understood to be a form of “talking shop” for industry.

Lists of WRMA conference attendees for 2002 and 2003 found online, suggest this “talking shop” is made up of powerful and significant players within the global economy including:

• Chicago Mercantile Exchange

• Goldman Sachs

• Ernst & Young

• Citigroup

• PricewaterhouseCoopers

• JP Morgan

• Entergy-Koch Trading

• Re-insurance companies including Swiss Re and AXA Re

• Energy companies including BP Energy and Centrica

• Risk modellers such as Risk Management Solutions

• Data suppliers to the weather markets like the firm we spoke to

Between them these organisations have had significant influence on UK policy makers in relation to their access to weather data.

In a 2008 report by the Department of Business and Regulatory Reform, it was reported that the WRMA and some of its conference attendees, alongside other powerful players in the financial markets, had influenced senior policy makers to push for “freer access to UK and other European weather data” (BERR). There is also evidence that the WRMA has brought together its members with the Met Office to discuss some of the barriers they are facing within the weather risk industry.

More recently, senior policy makers have been keen to promote the needs of the weather risk industry in relation to the drive to release more weather data under the open data policy initiative.

“The commercial side, you know the classic Peter Weiss analysis from about ten years ago on the weather markets in Europe against the weather markets in the US show a much larger and much more active private sector weather services market in the US. It also showed things like weather derivatives. Which was very much larger in the US than in the UK.”

“The role of this public data in supporting a rapidly growing weather risk management industry underwriting financial risk management instruments, valued at approximately $8 billion.” – Making Open Data Real consultation

Support has also come from Frances Maude MP – Minister for the Cabinet Office – who has also spoken publicly about the connection between the decision to release Met Office data as part of the government’s open data initiative and efforts to boost the weather derivatives market:

“The opportunities for enterprise won’t always be obvious. For example when some years ago the US released its public weather service one surprise result was a boost to the insurance industry. The data helped farmers to protect their profits leading to dramatic improvements in agricultural productivity.

“Today the weather derivatives market in the US alone is worth $3.5 billion – that’s all powered by big data. Last autumn, this government announced that we would publish data from all 5,000 weather stations in the UK.” – Francis Maude MP

These comments demonstrate that there is a keenness within some policy and political circles to address the frustrations of the weather risk markets, and open publicly funded weather data in order to grow the UK’s weather derivatives market and make it more competitive with the US market.