Bermuda-based derivative instrument company Armadillo's MarketGuard Insurance is set to launch an innovative new product which insures homeowners against the risk of interest payments on their mortgages going up.

The product, which hits the market in May and is yet to be named, can be used for variable mortgages, comes in British pound sterling only and runs for two years, according to joint owner Nick Faulks.

It works by making up the difference in payments if interest rates go up by more than the selected level of excess, and is easy to use while it cuts down on paperwork by depositing the money straight into the customer's bank account, instead of them having to fill out a normal claims form. From the information given, MarketGuard will calculate how much the payments have increased and will pay the remainder.

"It came about somewhat by accident," said Mr. Faulks, who runs the company jointly with business partner Jill Dequincy. "We have been in the financial derivatives business for many years now and a couple of employees of London International Financial Futures Exchange came to us saying that they had this idea for ensuring people against financial misfortune, but they could not see how to do it, but we had some idea how to do it.

"We had been kicking around some ideas and this one just happened.

"There is nothing like it and you have only to think about it to see this is something people would be interested in."

Over a two-year period, for an average mortgage repayment of £100,000 in the UK, the product costs £9 per month or a single premium of about £220.

Mr. Faulks, and Chris Taylor, his chief executive, have also managed to get the Treasury and HM Revenue & Customs to allow their products to be treated as insurance and not investment, or they would have been subjected to income tax.

For more information about MarketGuard interest rate insurance product visit www.marketguard.com