Monday, July 14, 2008

Carvill claims $60m derivatives traded on its CME contracts

(Reinsurance Magazine) Reinsurance broker Carvill has said that trading its Carvill Hurricane Index (CHI) contracts continues to grow on the Chicago Mercantile Exchange (CME) and the nominal value of derivatives traded has nearly hit $60m.

The broker said that in addition to exchange traded activity there is also considerable interest in bespoke over the counter (OTC) derivatives and more conventional reinsurance based on the index.

The Carvill contracts were launched in March 2007 and are based on the maximum wind velocity and size (radius) of each official storm as it hits land, before subsequently settling 36 hours after landfall.

John Cavanagh, joint chief executive of Carvill, said “the large demand that we are seeing reinforces our belief that an exchange traded derivative product for catastrophic hurricane risk is the natural progression to the convergence of the insurance markets and the broader financial community.

“At present the demand is mainly for seasonal aggregate and maximum contracts that operate like cat stop loss and first event policies. If there is more hurricane activity as the season progresses we are likely to see more demand for event strip contracts which can be traded as a live cat product during the life cycle of a storm”.

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