NEW YORK (Reuters) ? Stung by hurricane losses, two major US insurers, Hartford Financial Services Group Inc. and Allstate Corp. are boosting their participation in the growing market for catastrophe bonds, which protect from storm, earthquake and other losses.

Catastrophe or ?cat? bonds are raised in the fixed income market, and pay bondholders high rates, normally for two to three years, unless a major disaster occurs. In that case they give up their interest and principal to pay the insurers? claims.

Hartford yesterday purchased $247.5 million in coverage from cat bonds by buying reinsurance from a special purpose company that financed it through these bonds.

Incoming Allstate Corp. chief executive Tom Wilson said his company, the largest publicly-traded property insurer in the United States, is planning a cat bond in 2007.

The company hasn?t decided on the specific terms, Allstate spokesman Mike Trevino said yesterday.

Catastrophe bonds have grown to a $9 billion market this year, and new issuance doubled in size in 2006, according to Dan Ozizmir, who handles cat bonds for Swiss Re Capital Markets.

?The need for insurance capacity is due to the shortages caused by the hurricanes of 2004 and 2005,? said Ozizmir. In 2005, Hurricane Katrina alone caused more than $38 billion of insured losses.

Property carriers in the past relied on reinsurers, who provide backup coverage, to protect them from extreme losses.

But some reinsurers went out of business after last year?s losses, while others tripled their rates, making it difficult to obtain coverage.

Allstate?s cost of reinsurance for catastrophes surged to $406 million so far this year compared to only $136 million a year ago, according to its latest quarterly filing with the US Securities and Exchange Commission.

?A lot of the new reinsurers tend to be thinly capitalised,? said Cathy Seifert, an insurance analyst with Standard & Poor?s. ?With skyrocketing prices and less protection, it makes more sense to go to the bond market.?

Hartford said it purchased the multiyear coverage from Foundation Re II Ltd., a Cayman Islands company set up for this purpose.

Harford said $180 million of the cat bond would protect it from individual hurricane events along the Gulf and eastern coast of the United States. A $67.5 million coverage would insure the company against losses from earthquake, tornado and other events inside the United States.

Over $4 billion of catastrophe bonds have been issued so far, according to Ozizmir. Yields on cat bonds can range from seven percent to 45 percent.

?For owners of cat bonds, 2006 has worked out extremely well,? said Ozizmir. ?There haven?t been any hurricanes.?