A proposed basket of loss-threshold markets for Florida catastrophe risk. See how a hurricane bond’s loss layer becomes an index, then a prediction market fund.
Proposed index & PMF preview · No live market prices
The reference covers Florida named storms, including hurricanes. It measures Citizens’ covered losses, not total Florida damage or all industry insured losses.
Covered Florida named-storm losses accumulated over one representative annual risk period. The proposed index approximates this layer with weighted YES/NO markets. A PMF would package either side as one managed basket.
Gross scenario ROI, including position interest.
One representative risk period · before fees.
This preview approximates the reference bond’s covered-loss layer. Entry pricing is benchmarked to its issuance spread; we have not independently modeled catastrophe probabilities or established equal investment risk.
The loss exposure comes from the reference bond. We use Citizens covered annual aggregate Florida named-storm loss, with attachment at $9.6B and exhaustion at $10.8B, based on Everglades Re II 2025-1 · Class A. This means accumulating qualifying losses over an annual period. Choosing a published loss layer gives the proposed contracts a concrete economic reference.
Settlement depends on covered losses. The slider asks what the basket would pay at a given loss amount; it does not forecast that amount. YES wins only when the final qualifying loss exceeds a contract’s threshold. The 26 weights approximate a straight-line loss layer within two percentage points of face value. They are payout contributions, not probabilities. The contracts all depend on the same loss measure.
The spread anchors the entry-price example. The reference issuance spread is 8.75%. We use it because it is an observed price for transferring the reference catastrophe exposure, rather than inventing a PMF premium. We choose YES entry cost p = s / (1 + s), giving 8.05% of face value, and NO entry cost 1 − p, giving 91.95%. With no loss, the NO basket settles at 100%, so its gain divided by entry cost is p / (1 − p) = 8.75%. This matches the spread by construction; it does not establish fair PMF pricing or expected return. Actual constituent prices would be set by their markets.
Published modeled loss is context, not our pricing engine. The reference bond’s initial annual expected principal loss is 1.56%. Expected loss averages loss severity across modeled outcomes; it is not the probability of any loss. We have not run the underlying catastrophe model or assigned probabilities to the 26 contracts. That published estimate does not drive this simulator’s entry price or settle a contract.
Similar exposure still leaves differences. The two-percentage-point bound applies only to the simplified payout curve for the same covered-loss input. Matching the underlying risk would also require matching covered exposures, exclusions, observation dates, loss development and finality rules, and access to authoritative insurer-loss data. A wind-speed, burned-acreage, or industry-loss proxy would introduce a mismatch with the insurer’s losses, called basis risk, and require a new risk and pricing analysis. Even with matching losses, PMF entry-cost denominators, interest, fees, liquidity, and settlement timing can produce different investment returns. These previews cover one representative period, not the bond’s complete multi-year cash flows.
Interest is a separate assumption. The default adds 3.25% simple annual interest for a 365-day hold, benchmarked to published venue terms and assuming initial capital stays eligible. This is separate from catastrophe compensation. The displayed no-loss ROI is a conditional scenario, not a probability-weighted expected yield.
Covered Florida named-storm losses accumulated over one representative annual risk period. “No loss” means no loss to this covered layer.
Default derived from Everglades Re II 2025-1 · Class A’s 8.75% issuance risk spread: 8.75% ÷ 108.75% = 8.05% of face value. This sets the NO basket’s cost to 91.95%, so a 100% no-loss settlement earns 8.75% on its purchase cost, before interest and fees. This is a comparison assumption, not a catastrophe probability or live quote. Actual basket pricing would be the payout-weighted average of the 26 contracts’ market prices.
Simple interest on each side’s initial capital, assumed eligible throughout the hold. No reinvestment. Default rate: 3.25%, benchmarked to published Kalshi and Polymarket terms. PMF eligibility is unconfirmed. Holding days affect interest only.
YES basket payout
as a percentage of face value
A weighted YES basket pays as covered losses cross the thresholds.
Protection-buyer ROI incl. interest Settlement return -100.00% plus interest +3.25% = -96.75%. Both use protection purchase cost as the denominator. This scenario return is before fees and excludes the buyer’s underlying catastrophe losses.-96.75%Net result ÷ protection purchase cost
ROI excludes the buyer’s underlying catastrophe losses. A positive contract return is not the insurer’s overall profit.
A weighted NO basket retains value when covered losses stay below the thresholds.
Investor ROI incl. interest Settlement return +8.75% plus interest +3.25% = +12.00%. Both use the capital paid for the NO basket as the denominator. This is a scenario return before fees, not an annualized or historical PMF yield.+12.00%Net result ÷ investor capital
The NO position can lose its full purchase cost. This return is a scenario result, not an annualized or historical PMF return.
The weights sum to 100% of basket payout.
They are not percentages of invested capital.
Each box is one proposed YES/NO event contract. Hover for a quick summary; click or tap for the full rules.
| Market | Loss must exceed | Payout weight | Scenario outcome |
|---|---|---|---|
| 01 | $9,600,000,000 | 2% | NO |
| 02 | $9,648,000,000 | 4% | NO |
| 03 | $9,696,000,000 | 4% | NO |
| 04 | $9,744,000,000 | 4% | NO |
| 05 | $9,792,000,000 | 4% | NO |
| 06 | $9,840,000,000 | 4% | NO |
| 07 | $9,888,000,000 | 4% | NO |
| 08 | $9,936,000,000 | 4% | NO |
| 09 | $9,984,000,000 | 4% | NO |
| 10 | $10,032,000,000 | 4% | NO |
| 11 | $10,080,000,000 | 4% | NO |
| 12 | $10,128,000,000 | 4% | NO |
| 13 | $10,176,000,000 | 4% | NO |
| 14 | $10,224,000,000 | 4% | NO |
| 15 | $10,272,000,000 | 4% | NO |
| 16 | $10,320,000,000 | 4% | NO |
| 17 | $10,368,000,000 | 4% | NO |
| 18 | $10,416,000,000 | 4% | NO |
| 19 | $10,464,000,000 | 4% | NO |
| 20 | $10,512,000,000 | 4% | NO |
| 21 | $10,560,000,000 | 4% | NO |
| 22 | $10,608,000,000 | 4% | NO |
| 23 | $10,656,000,000 | 4% | NO |
| 24 | $10,704,000,000 | 4% | NO |
| 25 | $10,752,000,000 | 4% | NO |
| 26 | $10,800,000,000 | 2% | NO |
These are proposed markets to list, not existing executable contracts. Contract boxes and table outcomes update with the selected scenario.
The headline 12.27% is the bond’s annual coupon reported as of Apr 30, 2026. It includes the 8.75% risk spread plus income from Treasury money market collateral. The collateral component can change over time. This is a reported interest rate, not a live market yield, yield to maturity, or realized return.
The PMF scenario adds a separate position-interest assumption to the settlement return, before fees. Its entry cost is calibrated to the reference risk spread. The bond’s reported coupon is not used as the PMF entry assumption, which avoids counting collateral interest twice.
The reference layer loss is the covered loss above attachment divided by the layer width, bounded between 0% and 100%. The index sums the weights of YES-winning markets. NO settlement is the complement.
With L = weighted YES settlement and p = weighted YES entry cost, protection settlement ROI = (L − p) / p, and investor settlement ROI = (p − L) / (1 − p). Values are shown as percentages. The default entry assumption is s / (1 + s), where s is the reference annual issuance risk spread.
Endpoint weights are 2% and interior weights are 4%. The maximum approximation error is two percentage points of face value. At exact exhaustion the strict-threshold basket pays 98%; above exhaustion it pays 100%.
Reference annual expected principal loss at issuance: 1.56%. This sourced estimate is context only: it is neither an event probability nor an input to the PMF entry-price calculation. We have not independently modeled the proposed contracts’ loss probabilities. Approximating a payout curve does not establish identical expected losses, pricing, liquidity, or investment performance.
With annual interest rate r and holding days d, interest return i = r × d / 365. Interest as a fraction of basket face value is p × i for the protection buyer and (1 − p) × i for the investor. Total ROI is settlement ROI plus i on each side. We assume each side’s initial capital remains fully eligible until settlement, with no reinvestment. Interest is additional income; it does not change contract payouts, thresholds, or the approximation bound.
The default is 3.25% simple annual interest over 365 days. A losing position still has a −100% settlement ROI; with a full year of assumed interest its total ROI is −96.75%. Earlier settlement earns less interest. Changing the hold changes interest only, without rescaling the event payoff or annualizing total ROI.
Kalshi’s published interest terms, reviewed September 24, 2026, describe a variable 3.25% rate and daily accrual on eligible portfolio value using last traded prices. Polymarket’s Holding Rewards also publish 3.25% annualized, limited to selected eligible markets and calculated on sampled position values. The default 3.25% uses these published rates as a benchmark; it remains an editable PMF assumption. Actual interest depends on daily values, rates, eligibility, and settlement timing; these proposed PMFs have no confirmed interest arrangement.
Covered Florida named-storm losses accumulated over one representative annual risk period.
A listing would require an authoritative Citizens covered-loss determination, access to that data, exact annual observation dates, and a defined correction and finality window. These are proposed market terms, not an operational settlement feed.
The preview uses one representative risk period from a multi-year bond structure. It does not replicate all contractual adjustments, extensions, or reinstatement provisions. Final maturity and settlement timing can differ from the observation period.
Reference snapshot reviewed 2026-09-24. Bond terms and issuance pricing are reference inputs; PMF pricing and results are assumptions and calculations.