A California firm announced today it has launched what might bedescribed as weather derivatives for the little guy.

HedgeStreet, based In San Mateo, Calif., said it was sellinghurricane contracts for as little as $9 that return $100 if thestorm creates insured damage above certain levels that arecertified by the Insurance Services Office, Inc. in Jersey City,N.J.

Russell Andersson, a co-founder of HedgeStreet, said the firmhopes to graduate to much bigger contract sizes, but in themeantime they would be "democratizing" the area of weather-riskinvestments with an entry level far lower than the catastrophebonds in which reinsurers invest.

Small investors can go online at www.hedgestreet.com and open anaccount for as little as $100, Mr. Andersson explained.

HedgeStreet--which describes itself as the nation's firstgovernment-regulated online retail market for trading binary andfutures contracts--already has products dealing with the oil andreal estate markets.

It said traders can now "hedge or speculate on the economicimpact of hurricane and tropical storm damage."

Mr. Andersson said traders are offered three options, paying outin the event of insured damage greater than $25 million, $100million and $1 billion.

The HedgeStreet offerings for a weather event begin once atropical storm has developed over the Atlantic Ocean, as determinedby the National Hurricane Center.

Contract transactions on a named storm are open until theNational Hurricane Center says it has departed.

"If it veers off, and the National Hurricane Center says thestorm has passed, we close and settle the contract. If it makeslandfall, you can trade after it hits, until two days before ISOcomes out with its number," Mr. Andersson said.

He noted that it might be unlikely that there would be anycontract offerings after a storm hit. His firm he explained holdsfunds on behalf of customers and when a contract is purchasedHedgeStreet ensures that "the other person on the other side if thetrade has enough money" to cover the transaction.

HedgeStreet said the last trading day for these contracts willcoincide with the last day of the hurricane season--Nov. 30. Mr.Andersson said the company is hopeful that, in addition to membersof the public, hedge funds and the insurance markets willparticipate in hurricane contracts.

Last night, hurricane contracts for Tropical Storm Debby, whichoriginated off the west coast of Africa, were listed and madeavailable for trading today at 9:00 a.m. EDT.

Chris Guidette, a spokesman for ISO--whose Property ClaimServices unit provides the insured loss numbers HedgeStreet willuse, said tropical storm derivatives are "another tool insurers canuse to mitigate loss and are particularly important in this time ofescalating loss exposure."

He said such contracts "can allow risk transfer of insurablelosses within the insurance industry. If an insurance companywrites in areas not hurricane-affected, it might assume somehurricane risk by buying instruments like this."

Mr. Guidette added that the hurricane contract market could helplink reinsurers with traditional capital markets, as well asinvestors in the larger equities market.

"HedgeStreet is using ISO data to offer a low-cost means ofhedging risk from hurricane and tropical storm damage. Ourintention is to build this market into a valuable resource formitigating storm damage risk," said Bill McIntosh, vice presidentof marketing for HedgeStreet.

Gary Kerney, assistant vice president of PCS, said that "ISOsees the development of tropical storm derivatives as another toolinsurers can use to mitigate loss in an era of escalatingcatastrophe exposure."