Flood Re, the state-backed flood reinsurance pool in the UK, has entered the disaster bond market in quest of £100 million in fully-collateralized UK flood retrocessional reinsurance, with a London Bridge 2 PCC Limited (Vision 2039 – 2025-1) transaction.
Flood Re is utilising the Lloyd’s insurance-linked securities (ILS) transformer construction London Bridge 2 PCC Restricted, to sponsor its first ever disaster bond.
London Bridge 2 PCC Restricted will problem the cat bond notes that can be bought to capital markets buyers and people funds used to collateralize reinsurance agreements to guard Flood Re in opposition to losses from important flooding occasions within the UK.
That is the primary ever indemnity disaster bond to guard in opposition to flood losses within the UK on an indemnity set off foundation.
It isn’t the primary ever UK flood cat bond although, that honour goes to Allianz’s Blue Wings Ltd. deal from 2007 that included parametric UK flood threat safety.
When it comes to different flood cat bonds, the most effective identified are the FloodSmart Re series for the US Nationwide Flood Insurance coverage Program, however in fact these defend in opposition to flood occasions linked solely to named tropical storms and hurricanes.
Elsewhere, flood threat has been a function of a lot of Japanese disaster bonds prior to now, in addition to quite a few US multi-peril cat bond offers.
So flood threat is definitely not an unknown within the cat bond market, however being a standalone flood threat bond centered on a rustic just like the UK, this can be a really notable deal for the market.
We’re instructed that London Bridge 2 PCC Restricted is ready to supply and problem a single, at the moment focused at £100 million, tranche of notes through a protected cell named Imaginative and prescient 2039 (Sequence 2025-1).
The cell has been named Imaginative and prescient 2039 as a result of, Flood Re goals to make sure that most households vulnerable to flooding have entry to reasonably priced flood insurance coverage, with out the necessity for Flood Re and so the entities purpose is to cease working in 2039.
The Imaginative and prescient 2039 – Sequence 2025-1 disaster bond notes will present Flood Re with three years of retrocessional UK flood reinsurance to the top of March 2028, on an indemnity set off and annual mixture foundation, we’re instructed.
UK flood losses can be coated throughout the nations of England, Wales, Scotland and Northern Eire solely.
The £100 million of Imaginative and prescient 2039 cat bond notes which might be being supplied would connect their protection above £800 million of mixture flood losses to Flood Re and exhaust at £1.4 billion, we perceive.
Sources stated the notes will include an preliminary attachment likelihood of two.8%, an preliminary anticipated lack of 1.7% and are being supplied to cat bond buyers with value steerage in a spread from 5% to five.75%.
It’s encouraging to see yet one more new sponsor within the disaster bond market and particularly as this gives a brand new and diversifying peril for buyers, in UK flood threat, that doesn’t exist within the cat bond area right now.
You possibly can learn all about this London Bridge 2 PCC Limited (Vision 2039 – 2025-1) disaster bond transaction in our Deal Listing, the place you’ll be able to analyse particulars of just about each cat bond ever issued.
