London Bridge 2 PCC Limited (Fuchsia 2 – 2024-1)

London headquartered specialty insurance and reinsurance underwriter Beazley has returned to the catastrophe bond market for what will be its second 144A natural catastrophe bond.

For its second cat bond covering natural perils, Beazley is again utilising the Lloyd’s insurance-linked securities (ILS) structure London Bridge 2 PCC Limited, to issue the notes and access capital markets investors.

We are told that London Bridge 2 PCC Limited is set to offer and issue a single, currently targeted at $150 million, tranche of Series 2024-1 notes via a protected cell named Fuchsia 2.

The Fuchsia 2 Series 2024-1 notes are set to be offered to cat bond investors and the proceeds from their sale will be used to collateralize a reinsurance agreement between the protected cell of London Bridge 2 PCC and Beazley, providing the company with a source of multi-year international property catastrophe reinsurance protection.

Like the first nat cat bond from Beazley, we understand this new issuance will again protect it against losses from named storm and earthquake events that impact the United States, Canada and certain parts of the Caribbean.

Also like the first cat bond, this new Fuchsia 2 will provide reinsurance to Beazley’s core underwriting entities, including its syndicates at Lloyd’s, its US E&S insurer and Irish insurer.

The targeted $150 million or more in coverage from the Fuchsia 2 2024-1 cat bond notes will provide Beazley with reinsurance across a more than three year term, running from January 2025 to the end of March 2028, we’re told.

The reinsurance coverage from these notes, which will be indemnity trigger and per-occurrence in nature, would attach at $800 million of losses to Beazley and cover a share up to exhaustion at $1 billion, we understand.

Which makes them more remote in risk terms than the previous Fuchsia 2023-1 cat bond issuance for Beazley, which initially covered losses from an attachment of $500 million.

We are told that the $150 million of Fuchsia 2 2024-1 cat bond notes that London Bridge 2 PCC will issue have an initial attachment probability of 1.37%, an initial expected loss of 0.99% and the notes are being offered to investors with spread price guidance in a range from 5% to 5.75%.

Update 1:

We’re told the target size for this Fuchsia 2 catastrophe bond issuance has been raised to $200 million for Beazley.

At the same time the price guidance for the Class A notes has been lowered and narrowed to between 5% and 5.25%.

Update 2:

This new catastrophe bond was priced to provide Beazley the upsized target of $200 million of reinsurance protection.

While the Fuchsia 2 Series 2024-1 notes that London Bridge 2 PCC will issuance have been priced to pay investors a risk interest spread of 5%, so at the low-end of guidance.