October 8, 2010 / 4:07 PM / 10 years ago

Insurer Axa eyes 150 mln eur catastrophe bond -S&P

* Bond to provide European windstorm cover

* S&P assigns “BB (sf)” rating

LONDON, Oct 8 (Reuters) - Axa (AXAF.PA), Europe’s second-biggest insurer, is to launch a 150 million euro catastrophe bond to cover it against potential losses from European windstorms, ratings agency Standard & Poor’s said.

The proceeds of the bond sale would help Axa meet potential windstorm claims in nine western European countries between Jan. 1 next year and Jan. 1, 2014, S&P said on Friday.

S&P has provisionally assigned a “BB (sf)” credit rating to the notes, the first to be sold under a wider 1.5 billion euro bond programme.

Catastrophe bonds allow insurers to pass on extreme risks, such as those related to earthquakes or hurricanes, to financial market investors, and are seen as an alternative to reinsurance.

Catastrophe bond issuers make regular interest payments to the bondholders, and, if no catastrophe-related losses are incurred, return the principal once the notes expire.

In the event of major catastrophe-related claims, however, the insurer uses the proceeds of the bond sale to absorb some of its losses.

The catastrophe bond market has sprung back to life this year after 12 months of paralysis following the collapse of investment bank Lehman Brothers, a counterparty in several early bond issues. [ID:nLDE65H1SS] (Reporting by Myles Neligan; Editing by Will Waterman)

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