Chartis is returning to the Bermuda capital market to build extra coverage against US hurricane and earthquake risks.

The property and casualty insurance arm of American International Group (AIG) will sell $250 million of Series 2010-2 Class A-1 and Class A-2 notes through its Bermuda-based special purpose vehicle, a report by credit rating agency Standard & Poor's revealed.

In May this year, Chartis issued $425 million of catastrophe bonds through Lodestone Re, which is listed on the Bermuda Stock Exchange (BSX).

The new issuance will take the value of “cat bonds” listed on the BSX this year alone to $1.2 billion.

Other issuances in 2010, apart from Lodestone Re's earlier $425 million, transaction were from State Farm's Merna Re II ($350 million) and Flagstone Reinsurance Holdings SA's Montana Re ($175 million).

Lodestone Re's latest offering will cover National Union Fire Insurance Company of Pittsburgh, a subsidiary of Chartis, against losses from hurricanes and earthquakes in the United States.

Catastrophe bonds are typically issued by reinsurers seeking collateralised protection from capital markets investors rather than the traditional reinsurance market.

The BSX has benefited from new insurance regulations brought in by the Bermuda Monetary Authority (BMA) that make it easier to form and list insurance-linked securities such as cat bonds, through the Special Purpose Insurer (SPI) classification.

“This is the second series issued in 2010 by Lodestone Re. Each series covers the same perils (US hurricanes and earthquakes), the only differences being the attachment and exhaustion points”, said S&P.