The instruments are binary, meaning the pay-off is all or nothing for investors, depending on whether or not insured damage for the entire season – which officially ends on November 30 – exceeds a certain level.

Contracts are available for damage levels at $100m, $1bn, $10bn and $25bn. Figures for seasons since 1991 have ranged from nothing to almost $60bn, with last year's hurricanes, including Katrina, setting the record.

Trading so far has been light, but as of Thursday, investors' positions predicted a 21 per cent chance of more than $25bn of losses, something that has only happened twice since 1991.

Investors can buy or sell contracts. The buyer of a contract referencing $1bn of damage would receive $100 if the season causes that much damage or more. The seller would receive $100 if it does not. That contract cost about $60 to buy on Thursday.

Separate contracts are also available for investors wanting to bet on the amount of damage caused by individual storms. The exchange on Thursday launched a contract on tropical storm Debby, which formed in the Atlantic Ocean on Tuesday.

Russell Andersson, head of instrument origination at HedgeStreet, said: "Hurricanes are event-based risk instances that are perfect vehicles for these types of [contracts]. The events of Katrina have focused the insurance industry on hurricane risk, so while these contracts are for retail investors, long-term we think they could have applications for insurers."