called the market's first reinsurance contract to protect a company against the double blow of a property catastrophe loss and negative returns on an equity portfolio.

The asset-linked catastrophe protection policy was written in conjunction with Carvill, Inc. for the California State Automobile Association Inter-Insurance Bureau (CSAA).

The policy protects CSAA from the combined impact of insurance losses from a catastrophe, such as an earthquake, and a negative return on the company's equity market investments. Carvill is a privately held reinsurance intermediary.

Tempest Re chief operating officer George Rivaz said the company had been working on combining asset and insurance protection coverage in a single policy for the past year.

"We view the convergence of catastrophe protection and asset performance coverage as a natural development in the increasingly sophisticated use of reinsurance,'' he said.

Asset-linked catastrophe protection manages traditional catastrophe exposures by matching reinsurance coverage to a client's balance sheet fluctuations.

Reinsurers provide coverage for insurers when their losses mount beyond a stated limit as occurs when a natural disaster happens in the coverage area.

"In years when the equity market and surplus gains are strong, the cedant can retain more risk, whereas if the equity market is in decline and the surplus is under pressure, the reinsurance programme can expand to provide additional protection for catastrophic events,'' Tempest Re stated in a press release.

CSAA's president and chief executive officer James Molinelli said the integration of the two risks into one coverage policy was a cheaper way of doing things.

"We at CSAA see this layer of protection as an extremely cost effective way to extend our traditional reinsurance programme and to manage two of our most significant risks at an integrated fashion,'' he said.

CSAA is an affiliate of the American Automobile Association. The association's inter-insurance bureau underwrites about $1.5 billion in personal auto and homeowners insurance.