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Pool Reinsurance Co. Ltd., Britain’s terrorism risk reinsurer, has bought a catastrophe bond that provides £75 million ($99.1 million) in coverage, the government-backed facility said Tuesday.
The three-year catastrophe bond, which was created through special-purpose vehicle Baltic PCC Ltd., is Pool Re’s first use of insurance-linked securities to secure retrocessional reinsurance coverage.
The cat bond, which was issued under the United Kingdom’s regulatory regime for ILS products that was introduced in 2017, is listed on the Bermuda Stock Exchange. The bond provides £75 million of coverage excess of Pool Re members’ net loss of £500 million and covers physical damage arising from terrorist attacks on an indemnity basis, including chemical, biological, radiological and nuclear attacks, and cyber losses, a Pool Re statement said.
The bond is scheduled to mature in March 2022 and has an interest spread of 5.9%, according to a separate statement from GC Securities, a division of MMC Securities LLC, which placed the bond.
The risk was modeled using Pool Re’s own model calibrated by Cranfield University in Bedford, England, the Pool Re statement said.
“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,” Pool Re chief executive Julian Enoizi said in the statement, adding that the catastrophe bond diversifies the facilities retrocession program.
Pool Re was established in 1993 by the U.K. government and insurance industry, and its members include most insurers and Lloyd’s of London syndicates that offer commercial property insurance in the United Kingdom.
Pool Reinsurance Co. Ltd. is pushing forward with plans to offer nondamage business interruption coverage in light of the ongoing severe threat of terrorism in the United Kingdom.