Catastrophe Futures

Insurance futures contracts traded on the CBOT to help offset catastrophic insurance losses from claims perpetuated by the unpredictability of Mother Nature.

Oddly, if times are bad, future valuations go up. When times are good, future valuations go down. But if an insurance company has to fork out megabucks to cover huge losses during a catastrophic loss, at least they’ll offset their losses with modest gains from their futures contracts.