Insurance giant AIG announced Wednesday that it has entered into a reinsurance deal with Compass Re Ltd., which will provide $400 million of peak-zone protection against U.S. hurricanes and earthquakes.
Bermuda-based Compass Re has issued a $400 million catastrophe bond in a single tranche for the deal.
The transaction closed on Dec. 27 and provides AIG with fully collateralized coverage against hurricane and earthquake losses on a per-occurrence basis (under a reinsurance agreement related to the notes) through December 2014 using an index trigger with state-specific payment factors.
AIG has to now sponsored $1.85 billion in catastrophe bonds over the past three years.