Flood Re, the state-backed flood reinsurance pool in the United Kingdom, has now secured the targeted £140 million in fully-collateralized UK flood retrocessional reinsurance from its debut catastrophe bond, the London Bridge 2 PCC Limited (Vision 2039 – 2025-1) issuance, with the notes priced at the top-end of initial guidance.
Flood Re launched its debut appearance in the catastrophe bond market in February, with a plan to use the Lloyd’s insurance-linked securities (ILS) transformer structure London Bridge 2 PCC Limited to sponsor its first ever catastrophe bond.Initially, the target size for the deal was to secure UK £100 million (approx. $130 million) in UK flood reinsurance from the capital markets with this Vision 2039 deal.
However, in our first update on the deal, we revealed that the target size for the issuance had increased by 40%, with UK £140 million (approx. $180 million) in multi-year protection sought by Flood Re.
Now, sources have told us that Flood Re has successfully secured its first catastrophe bond, with the notes priced at the top-end of initial guidance to provide that 40% upsized £140 million of UK flood retro reinsurance protection to the company.
As a reminder, this will be the first ever catastrophe bond to protect against flood losses in the UK on an indemnity trigger basis.
London Bridge 2 PCC Limited will issue a single UK £140 million, tranche of notes via a protected cell named Vision 2039 (Series 2025-1), to provide Flood Re with three years of retrocessional UK flood reinsurance to the end of March 2028, on an indemnity trigger and annual aggregate basis.
It’s also important to highlight, that UK flood losses will be covered across the countries of England, Wales, Scotland and Northern Ireland only.
The UK £140 million of Vision 2039 cat bond notes would attach their coverage above £800 million of aggregate flood losses to Flood Re and exhaust at £1.4 billion.
The notes have an initial expected loss of 1.7% and were first offered to cat bond investors with spread guidance in a range from 5% to 5.75%.
That price guidance then was then adjusted to a tighter range of 5.5% to 5.75%, and now sources have told us that they have been priced at 5.75%, so the top-end of its initial guidance.
This is a strong result for Flood Re, as the company has maximised its opportunity to increase its reinsurance protection from the capital markets with this Vision 2039 deal, capitalising on the strong demand being seen from the cat bond investor base, while also securing the coverage at pricing within guidance, albeit at the upper-end.
As a reminder, you can read all about this London Bridge 2 PCC Limited (Vision 2039 – 2025-1) catastrophe bond transaction in our Deal Directory, where you can analyse details of almost every cat bond ever issued.
