IFEX owner says success of Event Linked Futures trading proves concept
Since trading began at the end of September, IFEX Event Linked Futures (ELFs) have traded more than 3,100 contracts the equivalent of $31m of limit.
ELFs are exchange traded binary futures contracts which are based on Industry Loss Warranty reinsurance contracts triggered by pre-determined losses to the insurance industry in excess of specified amounts.
IFEX ELFs trade annual 2008 and 2009 US Tropical Wind First Event contracts. There are five Loss Trigger Levels: $10bn, $20bn, $30bn, $40bn and $50bn. IFEX ILW futures follow the pattern of the reinsurance market in being event based. The performance of the contracts is ensured by a margining system provided by The Clearing Corporation. Insurance industry loss data is supplied by Property Claims Services (PCS).
Neil Eckert, CEO of the Climate Exchange PLC group, said: “The launch of IFEX’s initial contracts provides easy access to the catastrophe insurance asset class, but it also creates a new type of trading including the ability trade insurance price risk.”
IFEX started trading US Tropical Wind Event Linked Futures in late 2007 on the Chicago Climate Futures Exchange (CCFE). IFEX is a new London based insurance derivatives exchange which is part of the AIM quoted Climate Exchange PLC group.
