A US insurer has floated a second $300 million catastrophe bond to protect itself from potential losses resulting from unusual earthquake activity in the Pacific Northwest region of the United States and Canada.

The privately placed bond follows validation by FM Global scientists of scientific consensus that about once every 500 years, an earthquake along the Cascadia subduction zone, which extends from southern British Columbia to northern California, could release "significantly more energy than previously understood".

"The catastrophe bond is a cost-effective, conservative and highly secure financial alternative to protect FM Global's balance sheet and provide our policyholders with added financial protection," chief financial officer Jeff Burchill said in a statement.

Aon Capital Markets acted as lead manager to place the cat bond.

The commercial and industrial property insurer, a subsidiary of US-based Factory Mutual, had placed its first $300 million cat bond in June 2005.

There has been a spike in cat bond issues since last year's record losses from hurricane activity in the US Southeast. Most of the bonds have been floated by reinsurers looking to protect some of their exposures.

Among the most recent, Hannover Re issued a $150 million cat bond to cover windstorm risks in seven European countries.

Bermuda-based Endurance Specialty Holdings Ltd. obtained $235 million of collateralised catastrophe reinsurance protection using a combination of a cat bond and a credit facility.

The Bermuda-based company's subsidiary Endurance Specialty Insurance Ltd. obtained a reinsurance programme with coverage in three separate parts. There is $125 million of reinsurance for earthquake risk in California over the next 18 months. Another $60 million covers hurricane risk in the Northeast United States, the Gulf Coast and certain inland states over the next two years. Finally, $50 million of reinsurance covers losses from hurricanes or California earthquakes following an occurrence of either type of disaster during the same year.

Swiss Re Group locked in $950 million of coverage against a basket of catastrophe risks through another in a growing line of cat bonds, as the reinsurer extends its dominant presence in the insurance-linked securities market.