Until it hurts their stock price many companies will beunwilling to buy products that can hedge against the risk that hotor cold climate conditions pose to their business, a weatherderivatives expert advised last night.

William W. Windle, senior vice president for weather and energyproducts with Swiss Re's Capital Management and Advisory unit inNew York, made his comments during a briefing on the market thatunderwrote more than $5 billion in climate risk last year, even assome firms shy from the product.

"Its not uncommon for companies, particularly in the energysector, to have an understanding of what their exposure is, butchoose not to manage that," said Mr. Windle. Many, he said, cancalculate the dollar loss due to a reduction in power demand withextreme precision.

Using derivatives, firms can buy contracts to protect against anumber of degree days that within a certain range over a set periodthat will impact negatively on customer demand or other aspects ofa business.

Heating degree days and cooling degree days measure variation ofaverage daily temperature from 65 degrees or over a season. Thetotal number of degree days for a derivative contract period aredetermined by recording temperature readings for each day andaccumulating the differences from that average.

Mr. Windle said he is surprised to find that despite such riskmanagement tools companies ignore the opportunity to buyprotection.

He said despite the fact that companies often blame poor resultson weather and display a sophisticated knowledge of how preciselyit affects their revenues, they are not held accountable.

During stock analysts conference calls with management todiscuss quarterly financial returns, Mr. Windle said he does nothear them asking management about steps might have taken to dealwith the climate risk.

When it comes to selling such products, Mr. Windle said it isdifficult to discuss them with company's chief financial officer ortreasurer who says "until the market penalizes me, why shouldI?"

He said it was analogous to homeowners who might avoid buyinginsurance for their dwellings if banks did not require it.

Despite the fact that some companies take this position and"Wall Street is giving these folks a pass," Mr. Windle said manycompanies are proactive and the market for derivatives is huge. Henoted U.S. Department of Commerce estimates weather impactsbusiness contributing $1 trillion to the nations Gross DomesticProduct.

Among the common weather indices that Swiss Re underwrites aredegree days, temperature maximum and minimum, precipitation inchesand events, wind and combinations.

According to Swiss Re, which puts its market share at 20 percentof the weather market, demand by industry sectors is led by energyat 56 percent. The other segments are agriculture 13 percent,retail 9 percent, construction, 7 percent, transportation 4 percentand all others 11 percent.

Also speaking at the briefing was Judith Klugman, Swiss Remanaging director ABS/ILS Distribution, who discussed catastrophebonds and insurance linked securities. For CAT bonds she reportedthat new issues last year exceeded $1 billion and bonds outstandingwere at $4.5 billion.