Via EMII:

HUR

A new over-the-counter option has been launched that allows users to hedge against hurricanes making landfall in specific U.S. Atlantic and Gulf coast regions.

Weather Risk Solutions’ Hurricane Risk Landfall Options or HuRLOs is be sold via Chicago Mercantile Exchange brokers. Rather than using direct counterparties, the options are cleared via the CME’s Clearing360 platform, which clears over-the-counter transactions. So far, users include reinsurance companies, insurance companies and power companies.

The structure works as follows: an investor going long on a hurricane making landfall in one of 78 potential coastal hurricane landfall areas will receive a payout if a hurricane makes landfall. Alternatively if an investor buys a no landfall option, and no hurricane hits that area, he or she can exercise the option.