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HURRICANE CONTRACTS NOW TRADING ON HEDGESTREET
FIRST REGULATED ONLINE FUTURES MARKET TO ADDRESS ECONOMIC IMPACT OF DESTRUCTIVE STORMS
SAN MATEO, CA, AUGUST 24, 2006 -- HedgeStreet, the nation's first government-regulated online retail market for trading binary and futures contracts, today announced the launch of Hurricane contracts, offering traders the ability to hedge or speculate on the economic impact of hurricane and tropical storm damage.
Insurance Services Office, Inc., (IS0) (http://www.iso.com/products/2800/prod2803.html) will supply data on insurance claim estimates that form the basis for HedgeStreet's hurricane contracts. ISO estimates that insured property losses caused by Hurricane Katrina in 2005 topped $40 billion and had profound effects on energy prices and the U.S. economy.
"The destructive power of hurricanes is an unfortunate risk of living in many heavily populated coastal areas of our country. HedgeStreet is using ISO data to offer a low-cost means of hedging risk from hurricane and tropical storm damage. Our intention is to build this market into a valuable resource for mitigating storm damage risk," said Bill McIntosh, Vice President of Marketing for HedgeStreet.
"ISO sees the development of tropical storm derivatives as another tool insurers can use to mitigate loss in an era of escalating catastrophe exposure," said Gary Kerney, assistant vice president of ISO's Property Claim Services unit. "These products enable the risk transfer of insurable losses within the insurance industry and will help link reinsurance markets with traditional capital markets. We are delighted to be working with HedgeStreet in providing the underlying insured damage loss numbers for these Hurricane contracts."
HedgeStreet is introducing two classes of $100 binary contracts:
- HURRICANE SEASON: The first 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, as reported by ISO. The last trading day for these contracts will coincide with the last day of the hurricane season on November 30, 2006.
- NAMED STORMS: The second underlying value is based on the preliminary damage estimates caused by a hurricane or tropical storm, as calculated and reported by ISO. These contracts will be listed on HedgeStreet during hurricane season once a tropical storm has developed over the Atlantic Ocean as determined by the National Hurricane Center.
Hurricane contracts for Tropical Storm Debby, which originated off the west coast of Africa, were listed as of last night, and made available for trading this morning at 9:00 a.m. EDT.
The 2005 Atlantic hurricane season was a record-shattering year that witnessed the most named storms (28), the most hurricanes (15), the most category 5 hurricanes (5), and the most major hurricanes to hit the U.S. (4) . A hurricane is tropical cyclone with maximum sustained wind speeds in excess of 74 mph. These storms are classified according to the Saffir-Simpson Hurricane Scale on a rating of 1 to 5, based upon wind speed. Category 5 storms are the most destructive. Such increasingly violent activity is forecasted to continue over the next five years due to changes in climate patterns.
Today at 1pm EST HedgeStreet and ISO executives will hold a conference call to discuss and take media questions on the new hurricane contracts, their structure and their many uses. The call can be accessed at (866) 244-4530.
HedgeStreet offers new members 30 days free trading, and real-time funding allows investors to begin trading immediately upon opening an account.
About HedgeStreet
HedgeStreet Inc. is the only U.S. based person-to-person market that lets online investors trade innovative financial instruments based on economic events and price movements. HedgeStreet offers its members online futures trading, online currency trading and online commodity trading. A designated contract market (DCM) and a registered derivatives clearing organization (DCO), HedgeStreet is subject to regulatory oversight by the Commodity Futures Trading Commission (CFTC). For more information, visit www.hedgestreet.com.
About ISO
Founded in 1971, the source agency 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. For more information, visit www.iso.com.
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