"First (standalone 144A) terrorism risk cat bond oversubscribed"
From Artemis:
Pool Re, the UK government-backed mutual terrorism reinsurance facility,
has now successfully completed the issuance of its first terrorism risk
catastrophe bond, the £75 million ($97m) Baltic PCC Limited (Series 2019) with the placement said to have been oversubscribed thanks to ILS investor support.
The insurance-linked securities (ILS) market has seen terrorism risk
before, of course. As long ago as 2003, the cat bond market saw a
transaction called Golden Goal Finance Ltd. which provided event cancellation protection against risks including terror attacks.
There
have also been a number of repeated and renewed collateralized
reinsurance or private ILS transactions that transfer terror risks to
the capital markets, with a number of triggers and structures employed
over the year.
But Pool Re’s successful transaction is the first
standalone terror risk Rule 144A cat bond transaction, so brings a new
diversifying and man-made peril to the insurance-linked securities (ILS)
market.
Pool Re said today that the transaction was oversubscribed thanks to investor demand.
The £75 million transaction did see its pricing rise during the period it was marketed, having been launched to investors offering a coupon price guidance in a range from 5.4% to 5.9%. At pricing the coupon was fixed at the top-end of that range, offering an initial interest spread of 5.9%, in order to garner the necessary ILS investor support, which was clearly successful.
Commenting
on the completion of the Baltic PCC terrorism cat bond, CEO of Pool Re
Julian Enoizi said, “This is the first stand-alone terrorism risk
catastrophe bond. We have been working towards this placement for
several years and are excited to bring an entirely new source of capital
to the terrorism risk market for the first time. It diversifies the
funding of our retrocession programme, complementing the capital of
traditional reinsurers to spread terrorism risk even more broadly.
“In
addition, it further protects HM Treasury, and helps us towards our
ultimate goal of returning as much risk as possible to private markets.”
The
catastrophe bond covers physical damage risks from terror attacks in
the mainland UK, including covering attacks characterised as nuclear,
chemical, biological or radiological, as well as providing Pool Re with
coverage for any losses triggered by a terror-related cyber attack.
The
£75 million catastrophe bond will now provide a small component of the
£8.9 billion of protection that the UK taxpayer benefits from thanks to
Pool Re and its reinsurance and retrocession arrangements....MUCH MORE
