Swiss Re Insurance-Linked Fund Management

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London Bridge 2 PCC Limited (Fuchsia 2023-1)

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London Bridge 2 PCC Limited (Fuchsia 2023-1) – At a glance:

  • Issuer: London Bridge 2 PCC Limited
  • Cedent / sponsor: Beazley
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: RMS
  • Risks / perils covered: US, Canada, Caribbean named storms and earthquakes
  • Size: $100m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Dec 2023

London Bridge 2 PCC Limited (Fuchsia 2023-1) – Full details:

This is the first ever Rule 144A property catastrophe bond to be sponsored by London headquartered specialty insurance and reinsurance underwriter Beazley.

For its first full property catastrophe bond issuance, Beazley has elected to access the capital markets via the Lloyd’s of London owned UK based insurance-linked securities (ILS) structure, London Bridge 2 PCC Limited, which will issue these Fuchsia 2023 cat bond notes on behalf of the company.

This is also the first excess-of-loss catastrophe bond deal to be issued by Lloyd’s ILS structure London Bridge 2 PCC.

London Bridge 2 PCC Limited will issue a single, currently targeted at $100 million, tranche of Series 2023-1 notes via a protected cell named Fuchsia 2023-1.

The Fuchsia 2023-1 Series 2023-1 notes will be sold to cat bond investors and the proceeds used to collateralize a reinsurance agreement between the cell of London Bridge 2 PCC and Beazley, to provide it with a source of multi-year international property catastrophe reinsurance protection.

We are told that the protection will cover Beazley against losses from named storm and earthquake events affecting the United States, Canada and certain parts of the Caribbean.

This broad reinsurance coverage against the two peak peril catastrophe loss events, will protect Beazley’s core underwriting entities, including its syndicates at Lloyd’s, its US E&S insurer and Irish insurer, sources said.

It seems notable that the first cat bond from the Lloyd’s ILS vehicle London Bridge 2 PCC will provide reinsurance to entities outside of the Lloyd’s market as well, something other potential sponsors that might prefer a UK domiciled ILS issuance could find an attractive option now, given the vehicle is established and ready to go and means they do not need to set up their own issuer.

The $100 million or more in coverage from the Fuchsia 2023-1 cat bond notes will provide Beazley with reinsurance across a just over three year term, running from January 2024 to the end of March 2027, we’re told.

The reinsurance coverage from these notes, which will be indemnity and per-occurrence in nature, would attach at $500 million of losses to Beazley and cover a share up to exhaustion at $800 million.

We understand that gives the Fuchsia 2023-1 cat bond notes an initial attachment probability of 3.99%, an initial expected loss of 2.46% and the notes are being marketed to investors with spread guidance in a range from 9% to 10%.

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