Risk is a pervasive characteristic of life in developing countries, especially in rural areas. The economies depend heavily on weather conditions, and experience frequent weather hazards, such as drought, floods and windstorms. These factors typically affect most households and companies in the same area at the same time. Furthermore, as households and companies typically have a low asset base and little access to well developed insurance and credit markets, they are financially ill-equipped to deal with weather shocks. As a result, their weather risk management (WRM) is inefficient resulting in negative implications for economic and social development. New WRM insurance instruments, like area-based weather indices, provide a viable alternative to traditional insurance instruments, and offer real advantages to households, companies and governments in developing countries.