The Chicago Mercantile Exchange (CME) is to expand its weather derivatives product line with the launch of hurricane index futures...
CME, the world's largest financials exchange, is to expand its weather derivatives with CME-Carvill Hurricane Index futures and options on futures contracts.
The underlying indices will be calculated by Lloyd's reinsurance broker Carvill, which tracks and calculates hurricane activity.
“These new CME hurricane contracts will provide an additional way to help address the needs of the insurance industry and other markets,” said Felix Carabello, CME director of alternative investment products.
Citing the devastation caused by the three hurricanes, KWR, in 2005, Carabello added: “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.”
“We are excited about our joint venture with CME,” said John Cavanagh, joint chief executive of the Carvill Group.”
He added: “The convergence of the insurance markets and the broader financial community continues at a rapid pace, and our products, particularly in the catastrophe area, are becoming more commoditised in order to appeal to a more diverse range of capital providers.
"An exchange-traded derivative product for catastrophic hurricane risk is a natural progression to this trend.”
The product is scheduled for launch on 12 March.
