New York Mercantile Exchange has announced that it will list three new financially settled catastrophe risk (CAT risk) index futures contracts for trading on the CME Globex® electronic trading platform and for clearing on NYMEX ClearPort®, beginning on 4 March for trade date 5 March.
On 6 March, NYMEX will also launch CAT risk options contracts for trading on the NYMEX trading floor and for clearing on NYMEX ClearPort.
The record losses caused by hurricanes Katrina, Rita and Wilma in particular, have created a well documented shortage of insurance and reinsurance capacity for natural perils exposures, particularly hurricane risk. It is intended that the contracts will create a liquid market environment for the trading of property damage risk and facilitate the introduction of new capacity into the market.
The contracts are annual and will be listed for loss-years 2007, 2008 and 2009. Each will be listed as a December contract for those loss years. The futures and options contracts will expire on the last business day in March following the calendar loss year. The options contracts are European style options, settling only on expiration day.
Gallagher Re will compile the Re-Ex Index, against which the contracts settle, using data from Property Claim Services (PCS) for the appropriate regions: nationwide USA, Texas to Maine and Florida only; and perils: all natural peril losses with a value of >$25m except earthquake and terrorism.
