Pool Re, the UK government backed mutual terrorism reinsurer, saw significant interest and appetite from the capital markets for the issuance of its £100 million (USD 131m) Baltic PCC Limited (Series 2022-1) terror catastrophe bond, leading to an increase in the number of investors compared to its 2019 placement.
As we wrote previously, Pool Re successfully upsized its second catastrophe bond transaction from the £75 million target to £100 million, highlighting how well the offering was received by insurance-linked securities (ILS) investors.
Alongside the increase in retrocessional coverage secured for the 2022 transaction, Pool Re notes that the risk spread reduced to 5.5% compared to the 5.9% under Baltic PCC Limited (Series 2019).
The terrorism reinsurer says that its latest cat bond once again brings new sources of capital to the terrorism risk marketplace, while returning additional premium to the private sector, and moving UK taxpayers further from the risks it mutualises on their behalf.
As with the 2019 placement, GC Securities, a division of reinsurance broker Guy Carpenter, acted as the sole structuring and placement agent for the 2022 bond, which covers a three-year term on an annual aggregate basis.
Julian Enoizi, Pool Re’s Chief Executive Officer (CEO), commented: “This notable achievement demonstrates the continuing innovation and determination of Pool Re in returning a larger part of the risk to the commercial markets and protecting the UK taxpayer consistent with our commitment given as part of our five year review. I am also particularly pleased that we can demonstrate again the collaborative spirit that exists between Pool Re and HM Treasury by supporting the journey towards enhancing the UK’s ILS framework.
“This will certainly strengthen our industry’s contribution to the UK economy and enhance London’s position in a global industry.”
Ian Coulman, the reinsurer’s Chief Investment Officer, said that Pool Re is “delighted by the significant interest and appetite from the markets,” adding that when compared to the 2019 deal, this led to an increase in the overall number of investors.
“This strong interest from the capital markets has led to a reduced spread and increased size of the bond and is important as we work to bring in new sources of capital to cover terrorism risk reinsurance,” continued Coulman.
David Priebe, Guy Carpenter chairman, said: “We are very pleased to support Pool Re on this important terrorism risk transfer transaction. It demonstrates growing expertise and flexibility of the ILS market with respect to a broader spectrum of risks.”
While Cheng Li Yow, corporate partner at Clifford Chance, added: “We were delighted to advise Pool Re again on its second ILS transaction through Baltic PCC Ltd. The deal is another strong endorsement of the UK’s ILS and PCC regime and closing it would not have been possible without the effective support of the PRA.”
The new and larger catastrophe bond transaction means that Pool Re’s retrocession tower has increased in size from £2.475 billion a year ago to £2.5 billion.
The 2022 renewal featured 50 international reinsurers and was led by Munich Re with Hannover Re and Fidelis among others providing significant retro reinsurance capacity.