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NEW YORK -- Businesses that stand to lose money because of bad weather can hedge that risk with a contract from a newly formed company.

Worldwide Weather Trading Co. recently began offering "weather hedges" that are triggered when certain weather conditions occur. In a twist on the trend that has seen capital markets securitize weather-related exposures, the ultimate risk-bearer for these new hedges is the insurance market.

Worldwide Weather pays the contracts as they are triggered and is indemnified by insurers.

"The capital markets have been coming in to take business away from the insurance industry, but we're having insurers come in and take money from the capital markets," said Harold C. Mollin, managing director and CEO of Worldwide Weather. "We're doing insurance-ization instead of securitization."

A consortium of global insurers and reinsurers is in place to provide the security behind Worldwide Weather, according to Mr. Mollin. Among the insurers is Legion Insurance Co., a unit of Bermuda-based Mutual Risk Management Ltd. Transatlantic Reinsurance Co. is leading the reinsurance portion.

Mr. Mollin also serves as president of Worldwide Weather Insurance Agency Inc., a Manhasset, N.Y., agency that provides weather-related coverages.

Those coverages are written for special events that face a risk of cancellation from adverse weather, and to cover expenses of companies with weather-related losses. Coverage could be obtained to pay for snow removal, for example, if snowfall exceeded a certain amount over a specified period of time.

While those types of coverages are widely available, Mr. Mollin pointed out that insurance companies have not been eager to provide coverage against weather-related loss-of-revenue to heating oil companies, gas and electric utilities, agricultural operations and other enterprises with sales that rise and fall according to the weather.

Mr. Mollin said Worldwide Weather's hedges give those kinds of businesses a new way to cover the risk that weather will hurt revenues.

For example, a natural gas producer concerned that average temperatures in a particular city might be above normal this winter due to El Nino could purchase a contract to hedge the risk of lower gas sales.

The difference in Worldwide Weather's contracts and insurance coverage is that Worldwide "doesn't require an insurable interest," like a piece of property, Mr. Mollin explained.

The company instead treats the weather "like a commodity," he added. "You will now be able to buy the weather."

But unlike other commodities, the market for this one is inexhaustible, Mr. Mollin pointed out. "You can't buy up all the weather."

Buyers may elect to purchase options or swaps from Worldwide Weather.

An option pays a specified amount based on the occurrence of a defined weather condition -- 30 inches of snowfall during January, for example.

A swap pays a dollar value for every point above or below a specified threshold. In a temperature-related swap, Worldwide Weather pays the client a certain amount for every degree beyond the threshold.

"They tell us what they want to be paid, and we write a contract to do that," Mr. Mollin explained.

The contract price is set according to a variety of factors, including the type of weather event specified, probabilities that it would occur, geographic location and time of year for the covered event.

The company, which was launched last month, has done a number of trades for the heating and cooling industry, Mr. Mollin said, adding that interest also is high from other types of businesses.

"It looks attractive," said Bob Quinlan, chief operating officer at Pal Energy Corp. in Palmyra, N.Y. "We need to protect ourselves against warm weather. If there's a hedge out there, we better take it."

Mr. Quinlan said a hedge is needed to protect Pal Energy's wholesale and retail petroleum and home heating business because traditional methods of covering that exposure are not available.

"There's not an insurance coverage," and Worldwide Weather is presenting an affordable way to protect the company's winter revenues, Mr. Quinlan said.

Not all businesses with weather-related risks are in the market for hedges.

A hedge would have to be "very inexpensive" to interest Gold Kist Inc., according to Paul W. Pressley, director, risk management and insurance at the Atlanta-based agricultural company.

"Obviously, a lot of our business is weather-related," Mr. Pressley said.

"We sell a lot of fertilizer and seeds," and the company is a big buyer of corn, he pointed out.

But the risks of weather-related losses related to those products "have been acceptable for us to assume," Mr. Pressley said. "We have not chosen to look for insurance vehicles to hedge on that risk."

Gerald W. Wilkins, manager of risk management at Oklahoma Gas & Electric Co. in Oklahoma City, also said the products would have to be very cheap to be attractive.

The utility's exposure to loss of revenue is greatest in the summer, Mr. Wilkins pointed out, "so I imagine a hedge could be written against a cooler-than-normal summer."

However, that exposure historically has not led to large enough losses that a hedge or other protection is needed, Mr. Wilkins said.