The Travelers Companies Inc. (TRV) has raised $500 million selling catastrophe bonds, or “cat bonds.” Travelers entered into two reinsurance agreements with Longpoint Re II Ltd., whereby Longpoint Re II completed two cat bonds offering of $250 million each. Each cat bond provides protection for up to $250 million of reinsurance from losses resulting from certain hurricane events in the northeastern United States occurring on or before Dec. 18, 2012, and on or before Dec. 18, 2013.

In the event of a covered loss, Travelers will be entitled to recover amounts under the reinsurance agreements if the index losses for a single occurrence reach an initial attachment amount of $2.25 billion. The full $250 million coverage of each agreement is available on a proportional basis until index losses reach an initial exhaustion amount of $2.85 billion.

The cat bond program with Longpoint Re II replaces Travelers’ existing cat bond program with Longpoint Re Ltd., which expires in May 2010.

Since Sept. 30, 2009, 4 cat bonds have been issued in the market. In October, Mexico sold $290 million in cat bonds through The World Bank. In November, Flagstone Reinsurance Holdings Ltd. (FSR) issued $175 million in cat bond protection through Montana Re Ltd. Earlier in December; Swiss Reinsurance Co. sold $150 million in cat bonds through its Successor X Ltd. bond program.

Cat bonds are risk-linked securities that transfer a specified set of risks from a sponsor to investors. They are often structured as floating rate bonds whose principal is lost if specified trigger conditions are met. If triggered, the principal is paid to the sponsor. The triggers are linked to major natural catastrophes. Cat bonds are typically used by insurers as an alternative to traditional catastrophe reinsurance.

Zacks Investment Research

1. Senior Secured Floating Rate Bonds: The Best Investments to Own When Interest Rates Riseby Louis Basenese, Small Cap and Special Situations Expert Thursday, November 19, 2009: Issue #1141...
2. (TRV) Travelers Companies Inc. – Surprised by 23.85% in the Third QuarterTravelers Companies Inc. (TRV) recently raised full year guidance as it surprised on estimates for...
3. (C) Citigroup Raises $5 Billion from BondsOn Tuesday, two units of Citigroup Inc. (C) — Citibank NA and Citigroup Funding Inc....
4. (ALU) Alcatel Offers Convertible BondsAlcatel-Lucent (ALU) recently offered 750 million Euros ($1.07 billion) convertible bonds maturing in 2015, which...
5. Convertible Bonds: Income Securities With Positive Equity ExposureConvertible Bonds: Income Securities With Positive Equity Exposure by Alexander Green, Chairman, Investment U Investment...
6. Government Bonds: Not So VigilantI have been bearish on government bonds since March this year and have repeatedly warned...

Search Posts by Tag: Flagstone Reinsurance Holdings Limited | FSR | The Travelers Companies | TRV | Financial | Property & Casualty Insurance

RSS Feeds by Tag: Flagstone Reinsurance Holdings Limited | FSR | The Travelers Companies | TRV | Financial | Property & Casualty Insurance |

Other Posts by: vitalstocks | RSS Feed for this author