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 Restricted (Imaginative and prescient 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 situation the cat bond notes that will probably be offered to capital markets buyers and people funds used to collateralize reinsurance agreements to guard Flood Re in opposition to losses from vital 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 danger safety.
When it comes to different flood cat bonds, one of the best recognized are the FloodSmart Re sequence for the US Nationwide Flood Insurance coverage Program, however after all these defend in opposition to flood occasions linked solely to named tropical storms and hurricanes.
Elsewhere, flood danger has been a characteristic of a lot of Japanese disaster bonds prior to now, in addition to quite a few US multi-peril cat bond offers.
So flood danger is actually not an unknown within the cat bond market, however being a standalone flood danger bond targeted on a rustic just like the UK, this will probably be a really notable deal for the market.
We’re advised that London Bridge 2 PCC Restricted is ready to supply and situation a single, at the moment focused at £100 million, tranche of notes by way of a protected cell named Imaginative and prescient 2039 (Collection 2025-1).
The cell has been named Imaginative and prescient 2039 as a result of, Flood Re goals to make sure that most households prone to flooding have entry to reasonably priced flood insurance coverage, with out the necessity for Flood Re and so the entities aim is to cease working in 2039.
The Imaginative and prescient 2039 – Collection 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 combination foundation, we’re advised.
UK flood losses will probably be coated throughout the international locations of England, Wales, Scotland and Northern Eire solely.
The £100 million of Imaginative and prescient 2039 cat bond notes which might be being provided would connect their protection above £800 million of combination 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 provided to cat bond buyers with worth steering in a variety from 5% to five.75%.
It’s encouraging to see one more new sponsor within the disaster bond market and particularly as this affords a brand new and diversifying peril for buyers, in UK flood danger, that doesn’t exist within the cat bond area at the moment.
You’ll be able to learn all about this London Bridge 2 PCC Restricted (Imaginative and prescient 2039 – 2025-1) disaster bond transaction in our Deal Listing, the place you may analyse particulars of virtually each cat bond ever issued.
