Flood Re, the state-backed flood reinsurance pool in the United Kingdom, has increased the target size for its debut catastrophe bond, with now UK £140 million in fully-collateralized flood retrocessional reinsurance sought from the transaction.Flood Re entered the market a few weeks ago, with a plan to use the Lloyd’s insurance-linked securities (ILS) transformer structure London Bridge 2 PCC Limited to sponsor its first ever catastrophe bond.(approx.$130m) in UK flood reinsurance from the capital markets with this Vision 2039 deal.

But now, sources have told us, the target size for the issuance has been increased by 40%, with now UK £140 million (approx.$180m) in multi-year protection sought by Flood Re.At the same time, we’re told that the price guidance has been updated to a now narrower range, but towards the upper-end of the initial guidance.

As a reminder, this will be the first ever indemnity catastrophe bond to protect against flood losses in the UK on an indemnity trigger basis.London Bridge 2 PCC Limited will issue a single, now targeted at UK £140 million, tranche of  notes via a protected cell named Vision 2039 (Series 2025-1), to provide Flood Re with three years of retrocessional UK flood reinsurance to the end of March 2028, on an indemnity trigger and annual aggregate basis.UK flood losses will be covered across the countries of England, Wales, Scotland and Northern Ireland only.

The now UK £140 million of Vision 2039 cat bond notes that are being offered would attach their coverage above £800 million of aggregate flood losses to Flood Re and exhaust at £1.4 billion.The notes have an initial expected loss of 1.7% and were initially offered to cat bond investors with price guidance in a range from 5% to 5.75%.We’re now told that the price guidance has been updated, to a new range of 5.5% to 5.75%, so towards the upper-end but still within the initial guidance range.

It’s particularly encouraging to see Flood Re looking to expand on its ambitions for its first catastrophe bond, given this could open up a potentially significant new sources of efficient retrocessional reinsurance risk transfer for the UK’s flood risk needs.You can read all about this catastrophe bond transaction in our Deal Directory, where you can analyse details of almost every cat bond ever issued..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.

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