US underwriting group Travelers announced that it had entered into two reinsurance agreements with Longpoint Re II Ltd. ("Longpoint Re II"), a newly formed Cayman Islands insurance company, each providing up to $250 million of reinsurance from losses resulting from certain hurricane events in the northeastern United States.

The agreements provide protection for covered events occurring before or on December 18, 2012 and December 18, 2013, respectively. In connection with entering into the reinsurance agreements, Longpoint Re II successfully completed a $500 million catastrophe bond offering comprised of $250 million of Series 2009-1 Class A Principal At-Risk Variable Rate Notes due December 24, 2012 and $250 million of Series 2009-1 Class B Principal At-Risk Variable Rate Notes due December 24, 2013.

The insurer said: “The catastrophe bond program with Longpoint Re II will replace Travelers' existing catastrophe bond program with Longpoint Re Ltd., which will expire in May 2010. The reinsurance purchased from Longpoint Re II is intended to work in conjunction with Travelers' traditional reinsurance to provide $1 billion of protection for Northeast hurricane events in excess of $2.25 billion of losses. “

Amounts payable under the two new reinsurance agreements with Longpoint Re II will be based on an index created by applying predetermined percentages to insured industry losses in each state in the covered area as reported by Property Claim Services.

In the event of a covered loss, Travelers will be entitled to recover amounts under the reinsurance agreements if the index losses for a single occurrence reach an initial attachment amount of $2.25 billion. The full $250 million coverage of each agreement is available on a proportional basis until index losses reach an initial exhaustion amount of $2.85 billion. The attachment and exhaustion amounts will be reset annually to maintain modelled probabilities of attachment and expected loss on the catastrophe bonds equal to the initial modelled probabilities of attachment and expected loss.