Eurex launches hurricane futures
London, 18 June: Germany-based exchange Eurex is to launch hurricane futures on 29 June, it announced on Tuesday, targeted at asset managers, hedge funds, banks and insurance and reinsurance companies.

The exchange will list dollar-denominated contracts to cover insured losses, based on data from ISO Property Claim Services, from hurricanes in three regions initially: US nationwide; Florida; and the Gulf coast states. A spokesman said that the contracts may be extended to other regions in the future.

The contracts will list initially at $100 and have a minimum tick size of $10. The payouts will be binary – that is, either $10,000 if a hurricane leads to the relevant insured loss threshold being hit, or zero if no hurricane occurs during the contract's life.

For the nationwide contracts, the trigger levels will range from $10 billion to $50 billion, in $10 billion increments, while the Gulf coast contracts will be for $10 billion and $20 billion and the Florida ones for $30 billion, $40 billion and $50 billion, said the spokesman.

Each contract is a “de facto first event” contract, he added. This means that the contract will expire after the first catastrophe event, and another will be listed immediately afterwards. Contracts for both 2009 and 2010 will be listed initially.

The spokesman said that there will be no market-makers initially, as the contracts are aimed at the over-the-counter market cleared deals, through Eurex Clearing.

The move follows the launch, in September 2007, of similar contracts on the Insurance Futures Exchange (IFEX), a subsidiary of Climate Exchange, in collaboration with Deutsche Bank.