(Bloomberg) – Zurich Insurance GroupAG, Switzerland's largest insurer, may increase its offering ofinsurance that helps protect banks from catastrophic losses likerogue trading by sharing risk with investors.

The first such product, which covered Credit Suisse AG, lastmonth sold 220 million Swiss francs ($228 million) of similar notesunderpinned by a policy with Zurich. That was short of its originaltarget of 630 million francs.

Policy would be sold to investors as bonds

The risks would be covered by a policy held by Zurich and partof it would be sold to investors as bonds. Credit Suisse soldsimilar notes last month, the first such product, which coveredCredit Suisse AG, last month sold 220 million Swiss francs of suchbonds underpinned by a policy with Zurich. That was short of itsoriginal target of 630 million francs.

"We are now exploring the possibility of offering similarsolutions for other banks," a Zurich spokesman said in an e-mailedresponse to questions. "This is not an off-the-shelf product and soall approaches will need to be reviewed in detail based on anindividual customer's need."

The insurance protects banks from events like roguetrading, cyber threats and accounting errors. Such dangers enteredthe global regulatory debate after the 1995 collapse of U.K. bankBarings Plc following a trader's losing bets on derivatives. UBSGroup AG, Switzerland's largest lender and a Credit Suissecompetitor, lost $2.3 billion on unauthorized trading by KwekuAdoboli in 2011.

Demand for product

"The fact that Zurich Insurance is exploring further offeringsmay show that there is demand for such a product," said SandroKriesch, a managing partner at investment manager Twelve Capital."There are investors who would invest in such risks and it couldbecome a trend that operational risks will be put through to thecapital market."

Zurich retains 50 million francs of the risk related to CreditSuisse, with the rest bundled and sold to investors. Some investorswho declined to buy that product said the bond wouldn't fit intotheir portfolios and that the level of risk could be difficult toassess.

"I'm not sure whether all investors really know what theunderlying risks behind these are," said Daniel Bischof, an analystwith Baader Helvea in Zurich. However "everything that yields a fewextra basis points is being snapped up."

HSBC said in a note to investors that regulators may havemisgivings about alternative forms of risk mitigation such as theZurich product. Zurich said in 2013 it was planning to offer banksa way to lower the amount of capital they need to hold foroperational risks such as employeemisconduct.