Baltic PCC Limited (Series 2026-1)

Pool Re, the UK government-backed mutual terrorism reinsurance facility, has returned to the catastrophe bond market to sponsor what will become its fourth terrorism cat bond under the Baltic PCC Limited series of deals.

It marks the first time Pool Re has looked to sponsor a new cat bond to run alongside a previous issuance, layering the protection and staggering maturities from the notes, with this new 2026-1 issuance set to run alongside a 2025-1 deal and occupy part of the same layer of its retrocession tower.

We’re told Pool Re is looking to secure £100 million of retrocessional terrorism protection from this Baltic PCC Series 2026-1 cat bond issuance.

Baltic PCC Limited, Pool Re’s UK domiciled special purpose reinsurance vehicle, is offering investors a single tranche of Series 2026-1 notes, on behalf of its fourth protected cell, with the proceeds of the sale of the notes to be used to collateralise a retrocessional reinsurance agreement between Baltic PCC and Pool Reinsurance Company.

Pool Re is again targeting three years of retrocessional terrorism reinsurance coverage with this fourth Baltic PCC cat bond, with this 2026-1 issuance slated to mature at the end of March 2029, we are told, which is aligned with the prior deal.

As we had suspected, the Baltic PCC 2026-1 cat bond notes will provide Pool Re with terrorism retrocession on an indemnity trigger and annual aggregate basis.

As a result, the reinsurer will receive occurrence protection for major terror attacks and frequency protection for a series of smaller terrorist attacks, with the coverage being across England, Scotland and Wales, but not Northern Ireland.

As we’ve said before, retro cat bonds more typically utilise an industry loss trigger, but as Pool Re mutualises the risk from its members it makes an indemnity structure more appropriate coverage and this makes the fit within its traditional retro tower better as well.

We’re told the 2026-1 cat bond coverage closely mirrors the traditional Pool Re retro program and the 2025-1 cat bond, providing coverage for commercial property losses caused by conventional terrorism attacks, plus nuclear, biological, chemical, or radiological attacks (NBCR), but not nuclear facility impacts themselves which are carved out, and also covers physical damage from cyber-triggered terrorist losses.

This new Baltic PCC terror cat bond will attach and exhaust at the same levels as the 2025 issuance, so it effectively builds out more retrocessional reinsurance in the same layer of the tower for Pool Re.

The Baltic PCC 2026-1 catastrophe bond notes will attach their coverage at £700 million of losses to Pool Re and cover a share of a layer up to exhaustion at £1 billion.

With this another £100 million issuance and adding to the £100 million of the 2025 cat bond, it means Pool Re will have filled two-thirds of that layer from the cat bond market if this deal is successful.

The UK £100 million tranche of Series 2025-1 notes that Baltic PCC Limited is offering come with an initial attachment probability of 2.73%, an initial expected loss of 2.52% and are being offered to cat bond investors with price guidance in a range from 5.25% to 5.75%, our sources said.

Update 1:

We’re told that Pool Re secured the targeted UK £100 million of terrorism retrocession from its fourth sponsorship of a Baltic PCC Limited catastrophe bond.

The notes were priced to pay investors an initial risk interest spread of 5.5%, so at the mid-point of guidance.