The first catastrophe bond from logistics, warehousing and supply-chain focused real estate owner and investor Prologis, Inc. has now been priced at the top-end of initial guidance, while the issuance size remained at $95 million for the Logistics Re Ltd. (Series 2021-1) cat bond issuance.
Prologis ventured into the catastrophe bond market for insurance protection for the first time in November, becoming the latest corporate sponsor new entrant to the insurance-linked securities (ILS) market.
Prologis operates as a real estate investment trust, both owning and investing in commercial real estate, largely linked to the warehousing, logistics and supply-chain sectors and with a United States focus, although it does have global operations as well.
The company established a special purpose insurer (SPI) named Logistics Re Ltd. in Bermuda to issue catastrophe bond programs and notes and help it access the capital markets for disaster insurance protection.
Logistics Re Ltd. was at first aiming to offer a single $95 million or larger Class A tranche of Series 2021-1 catastrophe bond notes to investors.
The cat bond notes issued will be sold to ILS investors and the proceeds used to collateralize retrocessional reinsurance agreements between the SPI, Logistics Re, and Hannover Re.
Hannover Re will then provide reinsurance directly to Prologis’ captive insurer, Solution Insurance Ltd. which will in turn provide the insurance to Prologis, Inc.
The issuance eventually settled at the original targeted $95 million in size, we understand.
The Class A notes are set to provide Prologis with a three-year, $95 million source of US earthquake insurance protection, covering the 50 states (with California the peak exposure) on an indemnity and per-occurrence basis.
The Class A notes will attach once Prologis’ losses from an event surpass $350 million and cover a percentage of losses up to detachment at $550 million, giving the notes an initial attachment probability of 1.559% and an initial expected loss of 1.094%.
The Logistics Re 2021-1 notes were first offered to cat bond investors with coupon guidance in a range from 3% to 3.5%.
As we explained late last week that guidance was tightened towards the upper-end of the range, with the notes then offered with a coupon of between 3.25% and 3.5% just prior to final pricing.
We’re now told by sources that the notes were eventually priced at the top-end of guidance, so with a coupon of 3.5%.
That gives the $95 million of cat bond notes issued by Logistics Re a relatively high multiple-at-market for a US quake cat bond, which is possibly a reflection of Prologis’ broad commercial property exposure and also the fact it is a first time cat bond sponsor.