An American gas distributors which feared warmer than usual winters - when people bought less gas for heating - can rest easier now that it has bought insurance from a Bermuda company which will protect it from revenue losses.

Element Re has secured a major insurance transaction with Dallas-based gas distributor Atmos Energy Corporation. With an aggregate limit of $60 million it is one of the largest weather related end-user coverages placed to date.

The multi-season insurance policy is designed to protect Atmos against revenue loss from warmer than normal winter temperatures in a group of key cities in the US. A unique cancellation feature has been included in the transaction which allows Atmos to drop the last year of coverage on predefined terms.

Martin Malinow, executive vice president, said: "For many of our customers, insurance is becoming the primary tool for managing their weather risks because of financial and regulatory advantages. We believe that this innovative transaction, completed by an industry leader like Atmos, demonstrates that the value placed on insurance products will continue to grow with the weather market."

The deal was placed by Aon Risk Capital Products, the capital markets and non traditional insurance brokerage affiliate of Aon Corporation. Aon found the insurance limit, flexible term and financial security provided by Element Re helped Aon meet its strategic objectives.

Jeffrey Bortniker, chief executive officer of Element Re, said: "One of the reasons we created the company was because we sensed a need for highly rated insurance products that are designed to protect against revenue losses due to weather.

"We fully expect that our insurance platform will allow us to better serve our customers and help evolve the weather market to its next level of development, a process that will be furthered by the involvement of major players like Aon Risk Capital Products."'

Last month Element Re notched up another first. It completed a transaction with a German utility to provide financial protection against excessive rainfall in the summer months.

XL formed Element Re in September last year to provide weather risk management insurance, reinsurance and financial products. It offers customers a range of non-catastrophic weather risk mitigation products. These are designed to protect against the negative impact that normal weather fluctuations can have on the financial performance of companies operating in a variety of industries.

Mr. Bortniker said at the time: "Until now businesses have had a limited choice in terms of how they managed their weather related risk. To date derivatives have been the primary mechanism. We have identified a growing demand for weather protection in insurance form, something that is more appealing to corporations around the world."

The management team at Element Re has extensive experience in weather risk mitigation instruments. Before joining the company, they formed the core of the weather derivatives group at Enron North America where they were instrumental in the initial development of the weather risk market.