Small Insured Loss From Ernesto Foreseen

Traders on a newly-opened online retail market that deals in hurricane damage contracts are indicating they expect limited impact on Florida from Tropical Storm Ernesto.

HedgeStreet of San Mateo, Calif., which operates the government-regulated market in binary and futures contracts, said prior to today's start on Ernesto's contract, traders saw only a 36 percent chance of insured losses from that storm exceeding $25 million.

Under the contract rules set by the market, an insured loss of $25 million or above must be certified by the Insurance Services Office in Jersey City, N.J.

HedgeStreet said trading on binary options contracts on expected hurricane damage also had traders guessing that the chance of Ernest causing damage greater than $100 million is 20 percent, while the chance it will exceed $1 billion is 9 percent.

For the entire hurricane season, which ends Nov. 30, HedgeStreet traders are forecasting an:

o 85 percent chance that aggregate tropical storm damage will be greater than $100 million.

o 61 percent chance that damage will be greater than $1 billion.

o 28 percent chance that damage will be greater than $10 billion.

o 15 percent chance that damage will be greater than $25 billion.

Jeff Masters, a meteorologist writing on the Weather Underground Web site (www.wunderground.com) reported that the storm's winds had declined to 45 mph when it hit Florida, and that it was not until just before landfall that Ernesto managed to consolidate around a single center and start to intensify.

“Had the storm had another 24 hours over the warm waters, it would have been a hurricane,” he wrote.