Pool Re targets £100m of retro with its fourth Baltic terrorism catastrophe bond

We now have more information about Pool Re’s fourth terrorism catastrophe bond and have learned that the UK government backed mutual terrorism reinsurance firm is seeking £100 million of retrocession from the new Baltic PCC Limited (Series 2026-1) issuance.

We reported earlier this week that sources had told us Pool Re was back in the catastrophe bond market, for the first time looking to sponsor a new issuance while a previous one was still in-force.

Prior to this, Pool Re had only renewed its Baltic cat bonds as each of the previous vintages matured, but, as we explained when reporting on this year’s UK £2.75 billion retrocession renewal, we had heard that Pool Re was looking to stagger maturities of this retrocessional terrorism coverage from the capital markets.

Now, we have typical details on this transaction, which we understand to be more broadly offered to the cat bond investor base, having been more closely held to begin.

As suspected, there is little in the way of differences to the previous Baltic Baltic PCC Limited (Series 2025-1) issuance, as we understand Pool Re is adding this 2026-1 issuance to fill out more of the same layer of its retro tower, so the coverage and structure is said to be the same.

We’re told Pool Re is looking to secure £100 million of retrocessional terrorism protection from this Baltic PCC Series 2026-1 cat bond issuance.

Baltic PCC Limited, Pool Re’s UK domiciled special purpose reinsurance vehicle, is offering investors a single tranche of Series 2026-1 notes, on behalf of its fourth protected cell, with the proceeds of the sale of the notes to be used to collateralise a retrocessional reinsurance agreement between Baltic PCC and Pool Reinsurance Company.

Pool Re is again targeting three years of retrocessional terrorism reinsurance coverage with this fourth Baltic PCC cat bond, with this 2026-1 issuance slated to mature at the end of March 2029, we are told, which is aligned with the prior deal.

As we had suspected, the Baltic PCC 2026-1 cat bond notes will provide Pool Re with terrorism retrocession on an indemnity trigger and annual aggregate basis.

As a result, the reinsurer will receive occurrence protection for major terror attacks and frequency protection for a series of smaller terrorist attacks, with the coverage being across England, Scotland and Wales, but not Northern Ireland.

As we’ve said before, retro cat bonds more typically utilise an industry loss trigger, but as Pool Re mutualises the risk from its members it makes an indemnity structure more appropriate coverage and this makes the fit within its traditional retro tower better as well.

We’re told the 2026-1 cat bond coverage closely mirrors the traditional Pool Re retro program and the 2025-1 cat bond, providing coverage for commercial property losses caused by conventional terrorism attacks, plus nuclear, biological, chemical, or radiological attacks (NBCR), but not nuclear facility impacts themselves which are carved out, and also covers physical damage from cyber-triggered terrorist losses.

This new Baltic PCC terror cat bond will attach and exhaust at the same levels as the 2025 issuance, so it effectively builds out more retrocessional reinsurance in the same layer of the tower for Pool Re.

The Baltic PCC 2026-1 catastrophe bond notes will attach their coverage at £700 million of losses to Pool Re and cover a share of a layer up to exhaustion at £1 billion.

With this another £100 million issuance and adding to the £100 million of the 2025 cat bond, it means Pool Re will have filled two-thirds of that layer from the cat bond market if this deal is successful.

The UK £100 million tranche of Series 2025-1 notes that Baltic PCC Limited is offering come with an initial attachment probability of 2.73%, an initial expected loss of 2.52% and are being offered to cat bond investors with price guidance in a range from 5.25% to 5.75%, our sources said.

At the mid-point of that guidance range, the Baltic PCC 2026-1 cat bond notes would come with a spread multiple of 2.18 times the initial expected loss.

We can compare that to prior Baltic PCC cat bond deals, as the Baltic PCC 2019 terror cat bond notes came with a 2.18 multiple, the Baltic PCC 2022 notes had a multiple of 2.3 times EL, and the still in-force Baltic PCC 2025 terror cat bond notes had a multiple-at-market of 2.32.

So the multiple has come down year-on-year, indicating improved pricing for Pool Re, although nowhere near as dramatically as seen in some property catastrophe bond issuances.

Read all about this new Baltic PCC Limited (Series 2026-1) terrorism catastrophe bond in our extensive Artemis Deal Directory.