The Bermuda Commodities Exchange (BCOE), located at American International Group building on Richmond Rd., opens for trading today, hoping to break fresh ground in the trading of reinsurance options.

About nine member representatives will be present at the high-tech electronic trading floor when the exchange opens at 10 a.m. BCOE president Thomas Heise said. The BCOE is launching a new way to hedge and invest in catastrophe insurance risk using options contracts. Initially the exchange hopes to provide at least $500 million of additional insurance capacity for the US east coast region.

The exchange has attracted 20 prominent insurance, reinsurance and financial services companies -- many of them Bermuda based -- to its membership. If the concept works, and there are big companies betting that it will, the BCOE could eventually help boost Bermuda's position in the reinsurance market.

About one-third of catastrophic cover risk is already being underwritten by companies based on the Island.

Mr. Heise said he doesn't expect much trading until the January contract renewal season is about over. By then reinsurers will know whether they need additional cover. Trading will also come in bursts when a storm system occurs and approaches a covered area.

However he is pleased nine members will be present when trading opens. "I guess they plan on doing something,'' he said.

The exchange's members includes Bermuda-based companies AIG Insurance Commodities Trading Ltd., Aon Re (Bermuda) Ltd., CAT Ltd., General Re Underwriting Services Ltd. (a subsidiary of US-based General Re), International Property Catastrophe Reinsurance Co. Ltd., Mid Oncean Reinsurance Co., Ltd., Partner Reinsurance Co. Ltd., Renaissance Reinsurance Ltd., Stockton Reinsurance Investments Ltd., and Tempest Reinsurance Co. Ltd., which is being purchased by ACE Ltd.

Bankers Trust International, Chase Manhattan International Finance Ltd., Clement S. Dwyer Jr. & Aaron B. Stern, E.W. Blanch Holdings, Inc., Goldman Sachs International, Griffin Trading Co., Guy Carpenter Advisors, Inc., Morgan Stanley & Co. Inc. are also members.

Members will be able to conduct trading in option contracts based on an index of insured homeowner losses due to atmospheric perils in regions of the US over specified periods. The index was created by IndexCo., an affiliate of Guy Carpenter & Co., Inc. Members will use a secure electronic computerised system which allows them to post prices and volumes anonymously.