CHICAGO, Feb. 15 (UPI) -- The Chicago Mercantile Exchange is introducing futures contracts tied to U.S. hurricane activity.
The CME-Carvill Hurricane Index contracts will be listed as of March 12, the exchange said Thursday.
The contracts' value will depend on indexes calculated by the Carvill Group, a leading independent reinsurance intermediary in specialty reinsurance that tracks and calculates hurricane activity. Carvill will base the index on publicly available data from the National Weather Service on wind velocity, size and projected track of each storm.
"Following the devastating 2005 hurricane season that caused an estimated $79 billion in damage, it became apparent that there was limited capacity to insure customer claims," CME alternative investment products Director Felix Carabello said. "With these hurricane contracts, insurers and others will be able to transfer their risk to the capital markets and thereby increase their capacity to insure customers."
Traders -- including energy companies, pension funds, state governments and utility companies -- can choose from contracts based on projected hurricane activity in five defined coastal regions.
Unlike traditional contracts, the hurricane contracts will have no fixed expiration, expiring two days after an official storm makes landfall in a zone.
