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Hurricane Katrina, 2005

HedgeStreet Launches Hurricane Contracts for Trading and Hedging Risks

Strategic Insights

— 2 min read

HedgeStreet, a government-regulated online retail market, has introduced hurricane contracts, allowing traders to speculate on the economic impact of hurricane and tropical storm damage. The contracts are based on data from the Insurance Services Office, Inc. (ISO), which estimates that insured property losses caused by Hurricane Katrina in 2005 topped $40 billion. The new contracts are designed to provide a low-cost means of hedging risk from hurricane and tropical storm damage. HedgeStreet has also partnered with ISO to supply data on insurance claim estimates.

Key Takeaways:

  • HedgeStreet has launched hurricane contracts, offering traders the ability to hedge or speculate on the economic impact of hurricane and tropical storm damage.
  • The contracts are based on data from the Insurance Services Office, Inc. (ISO), which estimates that insured property losses caused by Hurricane Katrina in 2005 topped $40 billion.
  • Two classes of $100 binary contracts are available: HURRICANE SEASON and NAMED STORMS.
  • The HURRICANE SEASON contract's underlying value is based on the total estimated losses from hurricanes and tropical storms that caused at least $25 million in insured damages during the 2006 hurricane season.
  • The named STORMS contract's underlying value is based on the preliminary damage estimates caused by a hurricane or tropical storm, as calculated and reported by ISO.
  • HedgeStreet has partnered with ISO to supply data on insurance claim estimates.
  • The new contracts are designed to provide a low-cost means of hedging risk from hurricane and tropical storm damage.
  • HedgeStreet offers new members 30 days free trading, and real-time funding allows investors to begin trading immediately upon opening an account.
  • HedgeStreet is subject to regulatory oversight by the Commodity Futures Trading Commission (CFTC).
  • ISO is the preeminent provider of actuarial, statistical, and underwriting information for the property/casualty insurance and risk management industries and an internationally recognized authority on insured property losses from catastrophes in the United States.

Statistics:

  • Insured property losses caused by Hurricane Katrina in 2005 topped $40 billion, according to ISO.
  • HedgeStreet has introduced two classes of $100 binary contracts: HURRICANE SEASON and NAMED STORMS.
  • The 2005 Atlantic hurricane season was a record-shattering year, with 28 named storms, 15 hurricanes, 5 category 5 hurricanes, and 4 major hurricanes that hit the U.S.
  • A hurricane is a tropical cyclone with maximum sustained wind speeds in excess of 74 mph.

Sources:

  • Insurance Services Office, Inc. (ISO)
  • [www.iso.com/products/2800/prod2803.html](http://www.iso.com/products/2800/prod2803.html)
  • www.noaanews.noaa.gov/stories2005/s2540.htm
  • www.hedgestreet.com

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