Bermuda-based Aspen Insurance Holdings Limited announced two collateralized reinsurance contracts today to protect it against California earthquake and U.S. wind event losses.

The firm said it has entered into a multiyear property catastrophe reinsurance agreement with Ajax Re Limited, a Cayman Islands-domiciled reinsurer, to provide up to $100 million of reinsurance coverage for Aspen's insurance subsidiaries in the event of one or more California earthquakes.

The reinsurance agreement, Aspen said, is collateralized by Ajax Re's issuance of catastrophe bonds, and its reinsurance limit is proportionally available based on industry insured losses between $23.1 billion and $25.9 billion in the covered area, as reported by Property Claim Services.

Aspen explained that the full $100 million available is exhausted when the reported industry insured losses by PCS reach $25.9 billion.

This transaction coincides with the expiration of Aspen's existing catastrophe swap agreement and provides Aspen with coverage effective from Aug. 18 through May 1, 2009.

Ajax Re is described as a special purpose Cayman Islands exempted company licensed as a restricted Class B insurer in the Cayman Islands and formed solely for the purpose of entering into reinsurance agreements and other risk transfer agreements with subsidiaries of Aspen to provide up to $1 billion of reinsurance protection covering various perils.

The protection provided by Ajax Re will be funded, Aspen said, through the issuance of one or more distinct series of notes to qualified institutional buyers in permitted jurisdictions as part of Ajax Re's $1 billion principal at-risk variable rate note program.

In a separate transaction, Aspen said it intends, subject to completion of contractual arrangements, to enter into a $100 million industry loss warranty reinsurance contract to provide protection against U.S. catastrophic wind events.

The company said the ILW is structured in three layers, with trigger points ranging from $30 billion to $50 billion in industry losses as reported by PCS.

"These transactions enable us to protect our balance sheet from exposure to significant specific perils and support our ratings," said Chris O'Kane, Aspen's chief executive officer.

He added that Aspen manages its catastrophe risk exposures by using a combination of capital markets and traditional reinsurance.

Aspen, established in June 2002, provides property and casualty reinsurance in the global market, property and liability insurance principally in the United Kingdom and the United States, and specialty insurance and reinsurance consisting mainly of marine and energy and aviation worldwide.

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