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BNP Paribas closes $247.5 million catastrophe bonds transaction

French banking group BNP Paribas, as co-manager, has arranged for Foundation Re II, a Cayman Island exempted company, $247.5 million of catastrophe bonds.

Foundation Re issued the bonds to finance a new, multi-year reinsurance cover for Hartford Fire Insurance Company (HFIC), a subsidiary of HFSG, a US financial services and insurance company.

The bonds were issued in two classes, A and G. Class A will offer a maximum of $180 million in the event of severe US hurricanes during the period to 17th November. Class G will offer up to $67.5 million in the annual aggregate for hurricanes, earthquakes and tornados in the US in the period to December 31, 2008.

The performance of the bonds is subject to the impact of Property Claim Services’ (PCS) Insured Industry Property Loss Estimates on a customized index.

Mark Azzopardi, head of insurance and pensions within fixed income at BNP Paribas, said: This is the third successful series of catastrophe bond transactions which we have closed for Foundation Re companies in the last two years, taking the total capacity in force to $600 million. This series of transactions demonstrates how significant, long-term, fixed-price capacity can be sourced effectively from the capital markets.