The first catastrophe bond from logistics, warehousing and supply-chain focused real estate owner and investor Prologis, Inc. has seen its pricing guidance tighten towards the upper-end, while the issuance size remains at $95 million for the Logistics Re Ltd. (Series 2021-1) cat bond issuance.
Prologis entered the catastrophe bond market for the first time in November, becoming the latest first-time corporate sponsor entrant to the insurance-linked securities (ILS) market.
Prologis operates as a real estate investment trust, 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 has global operations as well.
The company established a special purpose insurer (SPI) named Logistics Re Ltd. in Bermuda for the purpose of issuing catastrophe bond programs and notes.
Logistics Re Ltd. started this issue process seeking to offer a single $95 million or larger Class A tranche of Series 2021-1 catastrophe bond notes to investors.
Those notes will be sold to cat bond investors and the proceeds used to collateralize retrocessional reinsurance agreements between the SPI and Hannover Re. Hannover Re will then provide reinsurance to the captive insurer, Solution Insurance Ltd. which will in turn insure Prologis, Inc.
The issuance remains sized at $95 million, we’re told, and the Class A notes are set to provide Prologis with a three-year 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 attach at $350 million of losses to Prologis’ insurance tower and cover a percentage of losses up to $550 million, giving them 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%.
We’re now told that guidance was tightened towards the upper-end of that range, with the notes offered with a coupon of between 3.25% and 3.5%.
Which means the notes could still price at the initial mid-point, which would be a good result for Prologis in its first sponsorship of a catastrophe bond.