On May 19, 2009, ISDA published a template U.S. Wind Event Confirmation (the “Wind Confirmation”), intended to standardize natural catastrophe swaps that reference certain wind-related events occurring in the United States (or in a specified subset of the United States), known as “USA Wind Events.” This form of confirmation may be used by market participants both to hedge losses from natural catastrophes as well as to gain exposure to wind-related risk.

The Wind Confirmation allows contracting parties to select as “Reference Events” one of three USA Wind Events, effectively electing to cover under the contract the perils of wind (including all flood following such perils) relating to (i) only named storms, (ii) only unnamed storms or (iii) both named and unnamed storms. Reference Events become events covered by the terms of the contract, known as “Covered Events,” if, generally speaking, a final catastrophe report is issued by the Property Claim Services, a division of Insurance Services Office, Inc. (or any successor), with respect to the Reference Event and the date of loss has occurred within the risk period specified under the contract and in the territory specified in the contract. The loss amount payable in connection with a Covered Event by the seller of protection under the contract may be either binary (i.e., the protection seller pays a specified percentage of the notional amount) or linear (i.e., the protection seller pays a percentage of the notional amount calculated by reference to a specified threshold and a specified exposure cap, but never more than the notional amount).

The Wind Confirmation includes a bilateral representation by the parties that the transaction documented thereunder is not intended to constitute a contract for surety, insurance or indemnity, as well as an acknowledgment that the rights and obligations of the parties are not dependent upon the party buying protection owning any interests affected by the Covered Events or having any direct or indirect exposure to the Covered Events. As such, in accordance with the terms of the Wind Confirmation, the obligation of the seller of protection to pay under a transaction is not contingent on whether the buyer of protection has suffered (or was at any time exposed to) any loss in respect of the Covered Events.