YES: Hedger
Someone financially exposed in the area might buy YES as supplemental protection against contamination costs. This is a hedge, not insurance: payment follows the regional well count and may not match their loss.
PFAS contamination
Could public market prices help an insurer underwrite groundwater risk?
Markets on a shared Orange County well count reveal different projections of future contamination. An insurer could compare market prices with their own models to inform underwriting for that peril.
A reported PFAS insurance placement shows the need for exposure information. Published modeling work connects contamination, exposure and potential liability.
One shared contamination forecast
How many of these 25 wells will have an annual PFOA reading of at least 10 ng/L in 2027?
Each YES contract pays $1 when its well-count threshold is reached. Ten contracts share the same public observation; NO pays when its threshold is not reached.
OCWD documents treatment responsibilities. Views on groundwater movement, pumping and future measurements could differ, but participation in these markets is untested.
The wells are fixed, untreated groundwater sampling points. PFOA is one PFAS chemical. This count does not measure water delivered to customers or an insurer’s loss.
Each well counts once, regardless of water volume, concentration above 10 ng/L or treatment effectiveness. Both existing and newly affected wells enter the count.
Ten markets, one contamination ladder
Each reached threshold turns on another YES contract and adds 10% to the hypothetical basket payout.
For our fixed group, we calculated 11 wells in 2023, 11 in 2024 and 14 in 2025 from state sampling records. The dashed curve smooths those counts using an assumed 1.5-well smoothing scale. At 12 wells, the raw record is one year in three; smoothing makes it about 56%. Earlier years are incomplete, and three years cannot establish reliable future odds.
Basket payout · % of maximumSmoothed baseline · 3 complete years
At 12 wells, 5 of ten YES contracts pay and the other 5 resolve NO. Together, the basket pays 50% of its maximum.
Move the well count to see which contracts pay. Edit the baseline or simulated YES prices in the table; price is not automatically an event probability.
See the ten contracts and edit the forecast
| YES question: at least… | Cumulative basket payout at threshold | Smoothed baseline (%) | Simulated YES price ($) | Selected outcome |
|---|---|---|---|---|
| 2 wells? | 10% | 99.91% | $0.80 | YES |
| 4 wells? | 20% | 99.56% | $0.72 | YES |
| 7 wells? | 30% | 96.65% | $0.64 | YES |
| 9 wells? | 40% | 88.61% | $0.56 | YES |
| 12 wells? | 50% | 55.88% | $0.48 | YES |
| 14 wells? | 60% | 30.02% | $0.40 | NO |
| 17 wells? | 70% | 6.96% | $0.32 | NO |
| 19 wells? | 80% | 2.03% | $0.24 | NO |
| 22 wells? | 90% | 0.28% | $0.16 | NO |
| 24 wells? | 100% | 0.08% | $0.08 | NO |
Forecast entries and simulated prices must stay level or decrease as thresholds rise. Edited entries are scenarios. The smoothed three-year baseline and simulated prices are not market quotes.
The ten thresholds are design choices; they are not cost tiers.
Who is the marginal buyer?
NO: Speculator
A speculator, trader or investor might buy NO seeking returns they expect to be uncorrelated with other holdings. Whether these contracts actually diversify a portfolio remains untested.
Could shared prices improve risk analysis?
Check a forecast
Compare an observed market price with an insurer’s own contamination forecast. Research on other prediction markets motivates a test here.
Use prices in a model
If prices prove informative and liquid, they could inform a regional hazard estimate. Price research shows why traded prices need careful interpretation.
Transfer risk
A matching buyer might use contracts to offset part of a cost. Treatment obligations are real; the proposed hedge remains untested.
The test: do executable prices add useful information beyond this three-year baseline and an insurer forecast? Any savings also depend on whether a specific forecasting task can be reduced after integration and validation.