HARTFORD, Conn.—Hartford Financial Services Group Inc. plans to place a $100 million catastrophe bond to cover a portion of its U.S. hurricane exposures, a market source confirmed Wednesday.

The bond, Foundation Re III Ltd., is being marketed to investors and is expected to close at the end of January, the source said.

If successful, it will be the first cat bond transaction during 2010.

A dramatic drop in cat bond pricing and strong investor demand are creating favorable conditions for sponsors to issue bonds, and experts have predicted strong activity levels for the sector this year.

Earlier this week, Aon Benfield Securities said cat bond pricing declined up to 36% for peak-zone perils in the United States during the fourth quarter of 2009.

The Hartford, Conn.-based insurer has issued two other bonds through its Cayman Islands-based special-purpose vehicle, Foundation Re Ltd.