Bermuda reinsurer Flagstone said yesterday it had entered into a $104 million catastrophe bond deal.

Flagstone bought the three-year retrocessional coverage on an indemnity basis from Cayman Islands-based Valais Re Ltd.

Valais Re was formed as a programme structure enabling further issuance of additional series of notes in the future.

Valais Re offers Flagstone indemnity protection on its global reinsurance portfolio through two separate tranches.

Valais Re has issued $64 million of Annual Aggregate Class A notes and $40 million of Per Occurrence Class C notes to collateralise its obligations under the retrocession agreements.

David Brown, Flagstone's cheif executive officer, said: "The multi-year, economical coverage on an indemnity basis gives us more price certainty over the cycle and avoids the basis-risk inherent in index or parametric-based covers."

Chairman Mark Byrne added: "This is our second cat bond type structure and the first placed under rule 144A. We also operate three sidecars.

"Successfully closing this transaction in the current challenging credit markets is a credit to the efforts of our team, coupled with our capital markets partners."

Swiss Re Capital Markets and UBS Investment Bank advised Flagstone on the transaction and underwrote the Valais Re notes.