Derivatives exchange CME Group has acquired the Carvill Hurricane Index from defunct reinsurance broker Carvill. It has been renamed the CME Hurricane Index.
CME has signed a memorandum of understanding with risk modelling firm Eqecat to be the new calculation agent for the index.
"We continue to be encouraged by the growth of the weather derivatives market, especially hurricane futures and options, which already have traded 4,000 contracts before the start of this year's hurricane season," said Felix Carabello, director of alternative investment products at CME Group. "As the new calculation agent for the hurricane index, Eqecat will help CME Group continue to provide innovative ways for businesses to manage their risk associated with weather events."
CME's hurricane futures and options will be settled to the CME Hurricane Index (CHI), which provides a numerical measure of the destructive potential of a hurricane. The CHI is based on Eqecat's calculation of the maximum wind velocity and size of each official storm to calculate the potential for physical and financial damage. The higher the CHI number, the more potentially damaging the hurricane.
Carvill stopped placing business in December 2008.