August 19, 2009

Fla. hurricane options exchange opened

A Florida businessman says he has established an online hurricane options market for property owners to hedge against skyrocketing insurance costs.

Ken Horowitz, former owner of the Miami Fusion Major League Soccer team, says his new exchange is called Weather Risk Solutions, in which traders can buy and sell options contracts betting on a storm hitting any of dozens of areas along Florida's Atlantic and Gulf coasts, The Palm Beach Post reported Wednesday.

The newspaper said traders could pay $18.03 for a contract that pays $844.09 if the first storm to make landfall hits Palm Beach County, with the contract price expected to rise if Hurricane Bill draws nearer the state.

We tried to design a very easy-to-use method for people to hedge against hurricane risk, Horowitz told the Post, adding he has sunk millions of dollars to build Weather Risk Solutions, whose 16 employees are located in New York.

Horowitz says the tool isn't meant to replace homeowners' insurance, but to hedge against the policies' deductible costs, the newspaper reported.