Typhoon season is here: besides insurance, "prediction markets" allow Taiwanese to prepare for weather risks in advance

As typhoon season returns, traditional insurance struggles to cover the "small losses" caused by weather, such as flight cancellations and business interruptions.

(TL;DR: Asia finally has its own prediction market — the new version of yoyo market built by an Asia-Pacific team goes live) (Background: World Cup Quarterfinal Preview | How Does the Prediction Market View the Golden Boot? After Messi's Stunning Comeback, the Odds Reshuffle)

Table of Contents

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• "Small Losses" for Taiwanese from Typhoons, No Insurance
• Climate and Prediction Markets: Starting with a $30,000 Hairdryer
• From Temperature to Typhoon: Weather Can Hedge Risk, Not Just Trade
• Few Typhoon Events on Western Platforms, Reflecting Demand for Localized Asian Weather Markets

By the time you read this article, Strong Typhoon Bavi is approaching Taiwan step by step. According to the Central Weather Administration, it will be closest to Taiwan on Friday (July 10), and a direct landfall by the typhoon's center cannot be ruled out. After a relatively calm typhoon season from 2020 to 2022, typhoons have once again become the biggest worry for Taiwanese in July and August since 2024.

How to reduce losses caused by typhoons? In addition to reinforcing preventive measures, weather events in prediction markets have also attracted high attention, offering another potential way to manage weather risks. yoyo market, which mainly serves the Asian market, has now launched a local weather prediction category for Taiwan, including temperature, typhoons, and other weather events.

"Small Losses" for Taiwanese from Typhoons, No Insurance

The losses caused by typhoons in Taiwan, besides billions of NTD in agricultural damage, are more often the parts not included in statistics: night market vendors losing a day's income from closure, disrupted travel plans due to flight cancellations, doubled vegetable prices after the typhoon, and even the work and life costs brought by a half-day typhoon leave. Almost none of these are covered by traditional insurance, and even if some risks can be insured, it still takes weeks or months to complete the claims.

Insurance covers "major disasters," but the impact of typhoons on most Taiwanese is the sum of a thousand "small losses." In the past, there were few tools to deal with such risks. The prediction market for weather events that has emerged in recent years offers a new market mechanism, allowing people to express expectations for specific weather events and providing an alternative way to cope with some risks.

Climate and Prediction Markets: Starting with a $30,000 Hairdryer

In the past, weather events mostly stayed at a general level. The most notable event this year occurred in Paris in April: the temperature at Charles de Gaulle Airport weather station mysteriously spiked by 2 degrees, flipping the temperature contract on Polymarket, with two traders winning a combined over $34k. The incident sparked heated discussion, and a video circulated online claiming someone used a hairdryer to interfere with the weather sensor, causing abnormal temperature data that indirectly affected the prediction market results.

Though this sounds absurd, it also highlights a key aspect of prediction market operation: the outcome is not subjectively determined by market participants but is settled based on pre-defined objective standards. Therefore, the authority of the data source and the transparency of the settlement rules are the core determinants of market credibility.

From Temperature to Typhoon: Weather Can Hedge Risk, Not Just Trade

Compared to temperature fluctuations in Paris, typhoons are more likely to cause actual losses. In the U.S., Kalshi has turned "hurricane landfall" into a formal contract, settled by official reports from the National Hurricane Center; the insurance industry has begun discussing using prediction markets as a non-traditional "insurance" tool because it has advantages that traditional insurance lacks: automatic settlement based on official data, money deposited within hours, no need for adjusters, and no claim disputes.

The hedging logic is actually quite intuitive. If a typhoon may cause business closures, market shutdowns, or trip cancellations, people can participate in typhoon-related prediction events to prepare for such uncertainties in advance. If the event occurs, market gains can offset some of the losses; if the event does not occur, the cost incurred can be considered the risk cost of reducing uncertainty. This is exactly the original intention of insurance. The difference is that a "prediction market" offers a more flexible, low-barrier market mechanism, with entry thresholds as low as tens of dollars. If you don't want to wait for settlement, you can close your position and exit at any time.

No one wants typhoons to cause damage, but extreme weather is often unavoidable. Weather events in prediction markets offer an alternative way of thinking, giving people the opportunity to manage risks in advance through market mechanisms.

Using my own situation as an example, I was originally scheduled to take a flight to Japan on the morning of July 12, but Typhoon Bavi may affect whether the flight departs. If there were prediction events on the market related to the typhoon's path, landfall, or flight impact, I would consider participating in the relevant market to reduce losses from itinerary changes.

Few Typhoon Events on Western Platforms, Reflecting Demand for Localized Asian Weather Markets

You can't find typhoons in Taiwan on Western platforms, after all, Taiwan's typhoons are too "local," and the probability of Western prediction markets launching such events is low.

However, yoyo market, which focuses on Asia, brings the subject back to Taiwanese life scenarios, such as: today's highest temperature in Taipei (settled based on data from the Central Weather Administration's observatory), whether Typhoon Bavi will reach category 17 or above. The operation is the same as Kalshi: choose YES or NO, and you can also close your position early based on market changes. During typhoon season, you can open it and take a look at the weather market. Not only can you observe the market's expectations for weather events, but it also provides a way to manage potential losses in advance.

No one can decide whether a typhoon will come or where it will go; but when facing risk, there can be one more way to respond. This typhoon season, in addition to closing windows, stocking up on supplies, tracking the path, and caring about typhoon leave, there is also an active risk management option.