Logistics, warehousing and supply-chain centered actual property proprietor and investor Prologis, Inc. has turned to the disaster bond market to supply earthquake insurance coverage safety, with the corporate set to be the beneficiary of a $95 million or bigger Logistics Re Ltd. (Sequence 2021-1) cat bond issuance.
Prologis is the most recent company sponsor of a disaster bond to come back to mild and as a primary time entrant to the insurance-linked securities (ILS) market, the business can be delighted to see a brand new class of firm concentrating on insurance coverage safety from the capital markets.
Prologis operates as an actual property funding belief, proudly owning and investing in business actual property, largely linked to the warehousing, logistics and supply-chain sectors and with a United States focus.
Prologis additionally has a danger focus in California, we perceive, with roughly 1 / 4 of the insured restrict that can be lined by this Logistics Re disaster bond coming from that state and given the elevated earthquake danger in California, the state contributes 95% of the preliminary anticipated loss to this cat bond.
The corporate has had a particular goal insurer (SPI) named Logistics Re Ltd. registered in Bermuda for the needs of issuing disaster bond applications and notes.
The safety from this primary cat bond can be cascaded down from the Logistics Re Ltd. SPI, by way of world reinsurance agency Hannover Re, by way of Prologis’ captive insurer Resolution Insurance coverage Ltd. and on to Prologis itself.
That’s a typical cascading strategy that’s usually used to allow a company sponsor to extra straight and simply entry the capital markets for insurance coverage safety.
Logistics Re Ltd. will search to difficulty a single $95 million Class A tranche of Sequence 2021-1 disaster bond notes.
These notes can be bought to cat bond traders and the proceeds used to collateralize retrocessional reinsurance agreements between the SPI and Hannover Re.
Hannover Re will then present reinsurance to the captive insurer, Resolution Insurance coverage Ltd. which can in flip insure Prologis, Inc.
The $95 million of Class A notes will present Prologis with a three-year supply of US earthquake insurance coverage safety, protecting the 50 states (with California the height publicity) on an indemnity and per-occurrence foundation, we’re instructed.
The Class A notes will connect at $350 million of losses to Prologis’ insurance coverage tower and canopy a share of losses as much as $550 million, we perceive.
That offers the notes an preliminary attachment likelihood of 1.559%, an preliminary anticipated lack of 1.094% and they’re being provided to cat bond traders with coupon steerage in a spread from 3% to three.5%, sources mentioned.
We perceive the disaster bond issued by Logistics Re Ltd. will sit fairly excessive in Prologis’ insurance coverage tower and that the company is trying to the capital markets to each prolong its protection and since costs and circumstances are deemed to be enticing for securing quake safety at the moment.
It’s encouraging to see one other company sponsor coming to market, particularly as Prologis comes from a special market section to different latest company cat bond beneficiaries.
This could assist to broaden consciousness of the disaster bond amongst giant corporates and house owners or holders of asset portfolios, which might in time stimulate extra of a lot of these sponsors to come back to the ILS market.
You’ll be able to learn all in regards to the Logistics Re Ltd. (Sequence 2021-1) disaster bond and each different cat bond issuance within the Artemis Deal Listing.