The Travelers Cos. Inc. has agreed to reinsurance pacts worth $500 million in protection to shield the Hartford property-casualty insurer against catastrophic losses from hurricanes that hit the Northeast in the next four years.
Travelers said it signed two catastrophe bond agreements for up to $250 million each in coverage with Longpoint Re II Ltd., a Cayman Islands-based reinsurer.
Reinsurers provide a financial cushion that insurers use to spread the risk of unexpectedly high claims from natural or man-made disasters.
Travelers said the Longpoint catastrophe hedge works in conjunction with Travelers’ traditional reinsurance to provide $1 billion of protection for Northeast hurricane losses that exceed $2.25 billion.
The new coverage replaces an existing catastrophe bond program Travelers has with a Longpoint affiliate, Longpoint Re Ltd., due to expire in May 2010.
Longpoint Re II will issue two classes of catastrophe bonds – each at $250 million — that mature on Dec. 24, 2012, and Dec. 24, 2013.
