It’s recently come to light through a 10Q report that back in March Montpelier Re invested in a hurricane option on seasonal futures traded in the Chicago Mercantile Exchange in an effort to protect itself from exposure to eastern U.S. hurricanes during the hurricane season (1st June – 30th November. The maximum recovery under the option is $5m.
It’s interesting as they still have catastrophe bond cover through their December 2005 Champlain Ltd. transaction which covers them till the end of this year. This leads me to think that they are either attempting to bolster that cover for this hurricane season or just dipping their toes in the new OTC hurricane futures market to see how it could benefit them in the future.
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