million in catastrophe bonds, the first insurance securitisation of 1998.

More and more companies are looking at insurance securitisation, the melding of insurance with financial products, as a means of spreading risk.

The bonds were issued in a private placement led by Goldman Sachs. The bonds provide $72 million in retrocessional catastrophe cover for natural and man-made perils underwritten Centre Solutions, according to Reactions magazine.

"However, the bond issue is closely linked with one particular catastrophe excess-of-loss contract, for $80 million in cover in excess of $45 million in retained losses, which Centre Solutions has entered into with a Florida homeowners insurer,'' the magazine stated.

The bonds have an expected maturity date of December 31, 1998 and has a layer of $22 million principal-protected secrities, along with $61.53 million of notes in which the principal is at risk.

The banks were issued through Trinity Re, a special purpose vehicle incorporated in the Cayman Islands. The name symbolises the partnership between the insurance, reinsurance and capital markets.

"An indication that the appetite for insurance risks may be growing among investors is that Centre Solutions intends this deal to be the first of many more in the future,'' the magazine stated. "It aims to set up a permanent channel to access capacity from the capital markets which, it reckons, will work out cheaper than reinsurance over the long term.'' Catastrophe bonds aim to securitise large risks that are traditionally borne by insurers. The bonds are usually placed on one-off events such as hurricanes, tornadoes, or earthquakes.

The concept has been around since the start of the decade, however few deals have been completed due to low investor interest or a lack of understanding.

A.M. Best rating agency estimates US insurers have a total capital of about $260 billion, this is tiny compared to the trillions of dollars traded in the world's securities markets.

The Chicago Board of Trade began with options on risk futures in 1992. Last year the Bermuda Commodities Exchange was set up to use options for risks in the US.

The aim, however, is to lure institutional investors such as pension funds, life insurers and large investment pools to the offerings.

The biggest catastrophe bond offering so far was placed by state-entity the California Earthquake Authority, which put one out for $1.5 billion last year.

The entire issue was bought by mega-investor Warren Buffett.

Several similar issues by others failed to attract enough interest and had to be cancelled. A.M. Best predicts 10 or more deals are expected to be offered this year.

Centre Solutions is a member of the Zurich Group, with offices in Bermuda, Dublin, London, New York, San Francisco, Sydney and Zurich, and plans to open a representative office in Hong Kong this year.