Centre Solutions (Bermuda) Ltd. has played a key role in the first sale of reinsurance-linked bonds tied to the 1998 Atlantic hurricane season.

The Bermuda company has ceded some of the risk it assumed from Florida property insurers to the capital markets by having a special purpose reinsurer package them as fixed income securities.

The innovative move brings further optimism that insurers and reinsurers will be able to access the capital markets to lay off portions of their risk, a long time goal of the industry.

Centre Solutions said this week that special purpose reinsurer Trinity Re Ltd.

has issued $83.569 million of fixed income securities due December 31, 1998 through a rule 144A offering completed March 3, 1998.

Those investing in the securities have indirectly assumed a portion of Centre Solutions' exposure to hurricane losses under a reinsurance contract written to cover a book of Florida residential property insurance.

David Brown, president of Centre Solutions (the former Centre Re), said, "Centre Solutions (Bermuda) Ltd. and (parent) the Zurich Group believe that the capital markets provide an attractive and reliable source of capacity which Zurich expects to tap in the future.'' The $83.569-million offering consisted of $22.036 million of Class A-1 floating rate defeasance notes, paying a coupon of LIBOR plus 1.82 percent and rated AAA and Aaa, respectively, and $61.533 million of Class A-2 floating rate notes, paying a coupon of LIBOR plus 4.36 percent and rated BB and Ba3, respectively, by Fitch IBCA, Inc. and Moody's Investors Service, Inc.

The Class A-1 notes provide for full repayment of principal at a later maturity date upon a loss.

Loss of principal on a bond is triggered when Centre Solutions (Bermuda) Ltd.

incurs losses as a direct result of a hurricane under an excess of loss reinsurance policy the company has written to a Florida residential property insurer.

Centre Solutions said the offering represents the first hurricane linked insurance securitisation for the 1998 season. The securities feature a trigger mechanism which resets features of the bond following a hurricane loss.

The reset mechanism limits the level of risk assumed by investors while providing some flexibility to the insurer to grow and otherwise change the underlying book of Florida residential insurance policies.

The offering is also the first insurance securitisation to feature book-entry format, enhancing liquidity for the security in the secondary market.

Centre Solutions said the Trinity Re offering sets a new benchmark in terms of low cost risk transfer utilising a structure that can be applied to a broad array of risks.

Risk Management Solutions, Inc. provided the risk analysis for the offering.

Centre Risk Advisors, a Zurich Group subsidiary, was consulted on the project by co-manager Zurich Capital Markets Securities Inc.

Centre Risk head, Richard Timbrell, said, "Investors in Trinity Re benefit through the opportunity to diversify portfolios of financial assets with an uncorrelated security, a high return on the investment given the ratings and in light of the risk assessment performed by Risk Management Solutions, Inc., and increased liquidity due to the book-entry format for the security.''