CME to Launch Hurricane Futures and Options on Futures Contract
February 14 2007 - 8:00AM
PR Newswire (US)
CME-Carvill Hurricane Index to be Available for 2007 Hurricane
Season CHICAGO and LONDON, Feb. 14 /PRNewswire/ -- CME, the world's
largest and most diverse financial exchange, announced today that
it will expand its weather derivatives product line with a
scheduled launch of CME-Carvill Hurricane Index futures and options
on futures contracts March 12. The underlying indexes will be
calculated by Carvill, a leading independent reinsurance
intermediary in specialty reinsurance that 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. "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. 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." In addition to
insurers, other customers such as energy companies, pension funds,
state governments and utility companies will be able to hedge their
risk of hurricanes striking in the United States in five areas
defined as the Gulf Coast, Florida, the Southern Atlantic Coast,
the Northern Atlantic Coast and the Eastern U.S. "We are excited
about our joint venture with CME," said John Cavanagh, Joint CEO of
the Carvill Group. "CME is the clear market leader in weather
derivatives and we believe this new product will offer a wider
range of catastrophe solutions to our customers. 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 commoditized 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." Dr. Steve Smith, Senior Vice President of ReAdvisory,
the analytical arm of Carvill said, "The challenge was to develop
an index that met the needs of both the derivative trading
community and the insurance market. We needed an index that is
easily understood, simple to calculate and based on publicly
verifiable data -- in short, an index which is transparent. Most
importantly for the trading community was the requirement that the
index could be calculated and settled within hours of an event
taking place." Using publicly available data from the National
Hurricane Center of the National Weather Service, the Carvill
Hurricane Index (CHI(TM)) uses the maximum wind velocity and size
(radius) of each official storm to calculate the potential for
damage. The front contract expires when a hurricane makes landfall
with the expiration pegged to the CHI. The contract tick size is
0.1 CHI point, which is equivalent to $100. Hurricane futures will
trade on CME Globex(R) from 5:00 p.m. to 3:15 p.m. the following
day Chicago time and options on hurricane futures will be available
for trading 8:30 a.m. to 3:15 p.m. Chicago time on the CME trading
floor. CME currently lists weather contracts based on aggregate
temperatures on 35 cities around the world as well as snowfall and
frost indexes. CME introduced weather derivatives in 1999. In 2006,
traded CME Weather derivatives had a notional value of $22 billion.
For more information on the hurricane contracts, please go to
http://www.cme.com/hurricane. CME (http://www.cme.com/) is the
world's largest and most diverse financial exchange. As an
international marketplace, CME brings together buyers and sellers
on the CME Globex(R) electronic trading platform and on its trading
floors. CME offers futures and options on futures in these product
areas: interest rates, stock indexes, foreign exchange,
agricultural commodities, energy, and alternative investment
products such as weather, real estate and economic derivatives. CME
is a wholly-owned subsidiary of Chicago Mercantile Exchange
Holdings Inc. (NYSE:CMENASDAQ:CME), which is part of the Russell
1000(R) Index and the S&P 500(R) Index. Statements in this news
release that are not historical facts are forward-looking
statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or implied in any
forward-looking statements. More detailed information about factors
that may affect our performance may be found in our filings with
the Securities and Exchange Commission, including our most recent
Quarterly Report on Form 10-Q, which can be obtained at its Web
site at http://www.sec.gov/. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events or otherwise. Chicago Mercantile
Exchange, CME, the globe logo, CME Globex and E-mini are trademarks
of Chicago Mercantile Exchange Inc. CLEARING 21 is a registered
trademark of CME and New York Mercantile Exchange, Inc. S&P,
S&P 500, NASDAQ-100, Nikkei 225, Russell 1000, Russell 2000,
TRAKRS, Total Return Asset Contracts and other trade names, service
marks, trademarks and registered trademarks that are not
proprietary to Chicago Mercantile Exchange Inc. are the property of
their respective owners, and are used herein under license. Further
information about CME and its products is available on the CME Web
site at http://www.cme.com/. Carvill is a leading independent
reinsurance intermediary in specialty reinsurance. Carvill's
success since its foundation in 1977 has been achieved through an
unwavering commitment to independence, integrity and service.
Carvill's tailored specialty products cover the needs of the
clients, and include Medical Malpractice, Directors & Officers,
Errors & Omissions liabilities, Major Property Catastrophe, and
Financial Products including Retrocessional business. For further
information visit http://www.carvill.com/. CME-G DATASOURCE: CME
CONTACT: media, Allan Schoenberg, +1-312-930-8189, or Mary
Haffenberg, +1-312-930-3435, both at , or investors, John Peschier,
+1-312-930-8491, all of CME Web site: http://www.cme.com/
http://www.carvill.com/
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