American International Group Inc. (AIG) has become the latest company to terminate a Bermuda-based sidecar, a trend brought about largely by the lack of catastrophes in the past two years.

AIG's $730 million Bermuda-based sidecar Concord Re was set up in August 2006 to reinsure US property risks written by AIG subsidiary Lexington Insurance Co.

Assets in the collateral trust have been released to lenders and equity investors, and AIG confirmed that the lenders did not suffer any losses during the life of the transaction.

A sidecar is effectively a pool of capital, a limited-life, special purpose reinsurance vehicle. Many of these entities sprang up after the hurricane season of 2005, the year of Katrina, Rita and Wilma, which cost the insurance industry more than $60 billion. Two quiet catastrope years have seen the industry enjoy bumper profits and the need for sidecars has diminished, as property coverage rates have fallen.

AIG's decision to terminate Concord Re, believed to be the first sidecar set up by a primary insurer, came hard on the heels of Bermuda-based White Mountains' $150 million buy-out of its sidecar Helicon Re Holdings last week.

Helicon was started by investors to insure White Mountains after the record 2005 hurricane season boosted demand for coverage.

"With the deteriorating market conditions in the property cat business, we no longer needed" the extra insurance coverage from Helicon Re, said chief executive officer Allan Waters in a statement.

Last October, Hiscox Syndicate 33 and Panther Re terminated Panther Re Bermuda, the first sidecar involving a Lloyd's syndicate.

But the flow of capital into sidecars has not completely dried up. Last week several XL Capital operating companies entered into a quota-share reinsurance treaty with newly formed Bermuda reinsurer Cyrus Reinsurance II.