LONDON, April 5 (Reuters) - Allianz, Europe’s biggest insurer, said it had raised $240 million of protection against North American earthquakes and hurricanes through its biggest ever sale of catastrophe bonds.
The bond issue, done through Allianz’s Bermuda-based Blue Danube vehicle, was significantly oversubscribed, the insurer said on Thursday, allowing it to raise more than its initial target of $200 million.
Catastrophe bonds allow insurers and reinsurers to pass on some of the natural disaster risk on their books to investors, freeing up capital for alternative lines of business.
Buyers of cat bonds benefit from returns that are largely insulated from wider economic or financial market developments, but risk losing some or all of their money if a catastrophe occurs.
Market participants say cat bond sellers have benefited this year from pent-up investor demand after a spate of major natural disasters, including Japan’s Tohoku earthquake, choked off new issuance for much of 2011.
Since mid-March, two other cat bond issues have raised more than initially targeted, market sources said.
Japan’s Mitsui Sumitomo raised $130 million of windstorm protection, surpassing the $90 million it was originally looking for, while Louisiana Citizens got $125 million of hurricane cover, beating the initial target of $100 million.
Separately, market sources said the state-backed Florida Citizens Property Insurance Corporation was seeking to raise $200 million of hurricane protection by selling cat bonds through its Everglades Re vehicle.
The latest Allianz bond, sold in two tranches of $120 million each, will help offset potential claims triggered by hurricanes in the United States, Caribbean and Mexico, as well as earthquakes in the U.S. and Canada. (Reporting by Myles Neligan; Editing by Ruth Pitchford)