London Bridge 2 PCC Limited (Vision 2039 – 2025-1)

This is the debut catastrophe bond for Flood Re, the United Kingdom’s state-backed flood reinsurance pool, as the entity looks to the capital markets for some of its retrocessional reinsurance needs in cat bond form for the first time.

Flood Re is utilising the Lloyd’s insurance-linked securities (ILS) structure London Bridge 2 PCC Limited, to sponsor its first ever catastrophe bond.

London Bridge 2 PCC Limited will issue the cat bond notes that will be sold to capital markets investors and those funds used to collateralize reinsurance agreements to protect Flood Re against losses from significant flooding events in the UK.

This is the first ever indemnity catastrophe bond to protect against flood losses in the UK on an indemnity trigger basis.

We are told that London Bridge 2 PCC Limited is set to offer and issue a single, currently targeted at £100 million, tranche of  notes via a protected cell named Vision 2039 (Series 2025-1).

The cell has been named Vision 2039 because, Flood Re aims to ensure that most households at risk of flooding have access to affordable flood insurance, without the need for Flood Re and so the entities goal is to stop operating in 2039.

The Vision 2039 – Series 2025-1 catastrophe bond notes will 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, we are told.

UK flood losses will be covered across the countries of England, Wales, Scotland and Northern Ireland only.

The £100 million of Vision 2039 cat bond notes that are being offered would attach their coverage above £800 million of aggregate flood losses to Flood Re and exhaust at £1.4 billion, we understand.

Sources said the notes will come with an initial attachment probability of 2.8%, an initial expected loss of 1.7% and are being offered to cat bond investors with price guidance in a range from 5% to 5.75%.

Update 1:

We’re told Flood Re’s target size for its debut Vision 2039 catastrophe bond has been raised to £140 million (approx. $180m).

At the same time the price guidance has narrowed towards the upper-end, at 5.5% to 5.75%.

Update 2:

We understand that Flood Re secured the upsized target for £140 million (approx. $180m) of UK flood retrocessional reinsurance from its debut catastrophe bond sponsorship.

The notes were finalised to pay investors a spread of 5.75%, which is at the top-end of the initial price guidance.