Beazley seeks first nat cat bond, Fuchsia 2023-1, via Lloyd’s London Bridge 2 PCC

Beazley, the London-headquartered specialty insurance and reinsurance underwriter, is sponsoring its first-ever Rule 144A property catastrophe bond, seeking $100 million or more in protection through a Fuschia 2023-1 issuance using the ILS structure owned by Lloyd’s London Bridge 2 PCC Limited.

beazley-logo-new-nov2022This new disaster bond is noteworthy for a number of reasons, including Beazley’s first 144A natural disaster bond, which arrives as Beazley is also seeking its first cyber disaster bond, the PoleStar Re 2024-1 The deal we reported on last week is a rare UK-domiciled catastrophe bond issue, and perhaps most notable because it is the first stop-loss catastrophe bond deal to use the London Bridge 2 PCC structure.

A Fuchsia feline bond from Beazley is something we’ve been waiting for for a few years now.

In 2019, Beazley registered Fuchsia Capital PCC Ltd.a UK domiciled insurance linked securities (ILS) vehicle that has never been used.

Beazley then registered a Bermuda-based structure in 2022 named Fuchsia Re Ltd. which was to be licensed as a special purpose insurer (SPI), but no catalytic bond agreement was ever concluded either.

Now, sources tell us that Beazley’s first-ever real estate catalytic bond will be called Fuchsia, the company’s brand color, but it has chosen to use the insurance-linked securities (ILS) structure of Lloyd’s as issuer, giving London Bridge 2 PCC its first ongoing cat bond issue.

This is a win for Lloyd’s and the UK’s ILS ambitions, while for Beazley there was undoubtedly a benefit to choosing to support the ILS PCC London Bridge 2 mission.

We understand that London Bridge 2 PCC Limited will issue a single tranche, currently targeted at $100 million, of Series 2023-1 notes through a protected cell named Fuchsia 2023-1.

The Fuchsia 2023-1 Series 2023-1 Notes will be sold to cat bond investors and the proceeds will be used to secure a reinsurance arrangement between London Bridge 2 PCC and Beazley, to provide it with an international property catastrophe source multi-year. protection by reinsurance.

We’re told the protection will cover Beazley against losses resulting from named storms and earthquakes affecting the United States, Canada and parts of the Caribbean.

This broad reinsurance cover against the two major catastrophes will protect Beazley’s main underwriting entities, including its Lloyd’s syndicates, its US E&S insurer and its Irish insurer, sources said.

It seems notable that Lloyd’s London Bridge 2 PCC’s first ILS vehicle cat bond will also provide reinsurance to entities outside of the Lloyd’s market, something other potential sponsors who might prefer a UK-domiciled ILS issue do not. Uni might find it an attractive option now, given the vehicle is established and ready to go, meaning they don’t need to create their own transmitter.

The $100 million or more coverage of the Fuchsia 2023-1 cat bonds will provide Beazley with reinsurance over a period of just over three years, running from January 2024 to the end of March 2027, we are told.

The reinsurance coverage for these notes, which will be indemnity and per occurrence in nature, would attach to $500 million of losses for Beazley and cover a portion until exhausted at $800 million.

We understand that this gives the Fuchsia 2023-1 cat bond bonds an initial attachment probability of 3.99%, an expected initial loss of 2.46% and the bonds are marketed to investors with spread forecasts of between 9 % and 10%.

It’s good to see Beazley finally entering the real estate catastrophe bond market, although the company perhaps surprisingly debuted in the 144A catalytic bond market with a cyber catastrophe bond deal.

Beazley’s entry into the cat bond market will send a strong signal to the cat bond market, to potential sponsors, as an efficient source of reinsurance comparable in cost to the traditional market.

While also reporting that the Lloyd’s London Bridge 2 PCC ILS structure is now open for catalytic bond activity and can also provide this protection more widely than just Lloyd’s syndicates.

You can read all about it London Bridge 2 PCC Limited (Fuchsia 2023-1) catastrophe bond transaction in our Deal Directory, where you can analyze the details of almost every catastrophe bond ever issued.

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