NEW YORK(Bloomberg & Business Wire) — Merna Reinsurance Limited plans to sell $4 billion of so-called catastrophe bonds to transfer some of State Farm Mutual Automobile Insurance Co.'s natural disaster risk to debt investors, according to Fitch Ratings.Bermuda-based Merna plans to sell five series of notes, according to Fitch. The debt will be sponsored by State Farm and rated from AAA, the top rating tier, to B+, four levels below investment-grade, Fitch said in a report dated yesterday.

The securities will allow Bloomington, Illinois-based State Farm to pass on a piece of its exposure to natural disasters, including hurricanes, earthquakes, tornadoes, hail, winter storms and brush fires, in the US and Canada to bondholders, Fitch said in the report.

The cumulative three-year indemnity-based trigger and $4bn size of this transaction make this transaction unique relative to prior catastrophe bonds.

Merna Re will provide fully-collateralised excess of loss catastrophe reinsurance to Oglesby Reinsurance under the terms of a three-year retrocession agreement.

Oglesby Re is a captive reinsurer, owned by State Farm, domiciled in Bermuda and licensed as a Class 3 insurer. Oglesby Re provides excess of loss catastrophe reinsurance to State Farm under the terms of a three-year reinsurance agreement.