26 February 2019ILS

Pool Re forms world's first-ever terrorism cat bond in UK

In a move sure to catch the attention of the Bermuda insurance-linked securities (ILS) market, the world’s first ever catastrophe bond exclusively covering terrorism risk has been issued in the UK.

Britain's state-backed terrorism reinsurer issued the £75 million cat bond through special-purpose vehicle Baltic PCC, the first protected cell company to issue a cat bond under the UK Risk Transformation Regulations 2017.

The bond, which is the second cat bond to be issued under the UK's new regulatory system for ILS, provides £75 million of retrocession protection in excess of Pool Re Members’ net loss of £500 million.

Pool Re suggested this brings new sources of capital to the terrorism risk market, returns additional premium to the private sector, and moves UK taxpayers even further from the risks Pool Re mutualises on their behalf.

“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," said Julian Enoizi, chief executive of Pool Re. "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.”

GC Securities acted as the sole structurer and placement agent for the cat bond.

“It was a privilege to work with the Pool Re team on their inaugural and innovative cat bond transaction, which was well supported by a globally diverse panel of sophisticated ILS market investors," said Des Potter, managing director of GC Securities.