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Hurricane Futures Fizzle in Year One

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Hurricane Futures Fizzle in Year One

Photo by Liz Bustamante

The 2007 Atlantic Hurricane season is officially over. And it was a quiet one for folks at the Chicago Mercantile Exchange, who introduced trading on hurricane futures this year. Felix Carabello is Director of Alternative Investments at the Merc. He says hurricane futures are a good way for insurance companies to protect themselves against heavy losses from storms.

CARABELLO: We generated a lot of interest. We didn’t have any trades, and I think the main factor was that it was a benign hurricane season.

The futures pay off when a hurricane makes landfall—the stronger the storm, the greater the return. Caribello says the Merc has no plan of ending the program despite the lack of activity in year one, in fact the Merc is researching ways to release new products, like wildfire options.

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