BRADENTON, Fla. — Florida’s Citizens Property Insurance Corp. Tuesday closed on the largest single catastrophe bond deal, transferring $750 million of risk to the capital market.

The issuance of so-called cat bonds reduces the potential for assessments on policyholders and may reduce CPIC’s reliance on the municipal market.

The cat bond deal, though not a traditional muni bond, is the first of a multi-pronged strategy to pay hurricane-related claims, if needed for Citizens’ coastal account over the next two years. The account benefiting from the cat bond transaction covers wind-storm policies in the coastal areas of the state.

Hurricane season begins June 1 and runs through November.

The cat bonds were sold by Everglades Re Ltd., a newly incorporated Bermuda-based company licensed as a special purpose insurer designed to raise $750 million of reinsurance for Citizens.

The structure is similar to insurance-linked securities sold by the California Earthquake Authority and the North Carolina Insurance Underwriting Association.

The bonds are rated B-plus by Standard & Poor’s.

The below-investment-grade rating recognizes the underlying catastrophe risk that could result in default in a matter of days, said S&P analyst Gary Martucci.

Using a cat bond to collateralize reinsurance allows CPIC to diversify its sources of funding, Martucci said.

If a qualifying event requires Citizens to use bond proceeds to pay claims, investors stand to lose some or all of their principal and interest.

Investors in cat bonds typically get paid a high rate of return, but the risk is high, Martucci said. Cat bonds are not registered with the Securities and Exchange Commission.

The bonds were sold to 32 qualified investors who will receive an interest rate of 17.75% over two years through maturity in April 2014.

Proceeds of the Everglades Re bonds will be invested in Treasury money-market funds rated at least AAAm by Standard & Poor’s.

“This brings to Citizens a significant increase in the diversification and capacity of risk transfer resources, while not adversely affecting the availability of risk transfer for the private Florida insurers,” said a statement by Sharon Binnun, CPIC’s chief financial officer.

To establish market pricing for the deal, Citizens and members of the financing team used an extensive marketing effort that included a taped conference call and physical meetings with key cat-bond investors in New York, Zurich, London and Bermuda.

Citizens board chairman Carlos Lacasa called the successful sale “a historic day” in the insurer’s effort to reduce the potential for assessments on all Florida policyholders, who could be charged to repay claims after a catastrophe.

Assessments can also be used as security to repay municipal bonds if they are sold to raise money to pay claims.

The state-run, nonprofit CPIC has become the largest property insurer in hurricane-prone Florida, and plans to purchase an additional $250 million of traditional reinsurance as part of its capital plan.

In another method to bolster the insurer’s bottom line for the upcoming hurricane season, Citizens is expected to sell up to $1.5 billion of tax-exempt bonds later this month to provide liquidity for hurricane-related property insurance claims for its personal and commercial accounts.

Those accounts provide property coverage for all perils, except wind storms covered in the coastal account.

Senior underwriters for the upcoming muni bond financing are Bank of America Merrill Lynch, Citi, Goldman, Sachs & Co., JPMorgan and Morgan Stanley. Co-managers are Jefferies & Co., Loop Capital Markets LLC, Ramirez & Co. and RBC Capital Markets.

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