USAA, the US's biggest direct home and car insurance company, is planning an unusual sale of $500 million in bonds on the capital markets. The bonds would be tied to the company's hurricane losses. Holders would have to surrender their principal if USAA is forced to cover more than US$1 billion in claims caused by any single hurricane in the next year. In return, they will receive a risk premium on top of the normal bond market return.
August 31 1996