Prologis targets Cat earthquake insurance bonds with Logistics Re

Prologis, Inc. has turned , owner of logistics, warehousing, and supply chain-focused real estate to the catastrophe bond market for earthquake insurance protection, with the company set to be the recipient of $95 million or greater from Logistics Re Ltd. (Series 2021-1) Cat Bond Issue: Prologis is the latest catastrophe bond sponsor to come to light and as the first to enter the ILS market, the industry will be pleased to see a new class of bond. A company targeting insurance protection from the capital markets.

Acting as a real estate investment trust, Prologis owns and invests in commercial real estate, largely associated with the warehousing, logistics and supply chain sectors and with a focus on the United States.

Prologis also has a concentration of risk in California, we understand, with roughly a quarter of the insured limit that will be covered by this logistics disaster bond from that state and given California’s high seismic risk, the state contributes 95% of the expected initial loss for these bonds cat.

The company has a Special Purpose Insurance (SPI) company called Logistics Re Ltd. Registered in Bermuda for the purposes of issuing catastrophe bond programs and bonds.

The security sequence of this first bond will be from Logistics Re Ltd.

This is a typical cascade approach often used to enable a corporate sponsor to have direct and easy access to the capital markets for insurance protection.

Logistics Re Ltd. will endeavor to to the issuance of a single tranche of $95 million of Series 2021-1 catastrophe bonds.

These bonds will be sold to Cat Bond investors and the proceeds used to secure retroactive reinsurance agreements between SPI and Hannover Re.

Hannover Re will then provide the reinsurance to the captive insurance company, Insurance Solutions Limited which in turn will insure Prologis, Inc.

The $95 million in Prologis Series A banknote will provide a three-year source for US earthquake insurance protection, covering the 50 states (with California experiencing peak exposure) on an indemnity and per-by-time basis.

The Series A banknote would inflict $350 million in losses on Prologis’ insurance tower and cover a percentage of losses of up to $550 million, we understand.

That gives the bonds an initial attach probability of 1.559%, an expected initial loss of 1.094%, and is offered to CAT bond investors with a coupon guidance in the range of 3% to 3.5%, sources said.

We understand that the disaster bond issued by Logistics Re Ltd. It will be very high in the Prologis insurance tower and that the company is looking to the capital markets to expand its coverage and because prices and terms are attractive to secure earthquake protection at this time.

It’s encouraging to see another corporate sponsor come to market, especially since Prologis comes from a different market segment to other recent corporate bond recipients.

This should help raise awareness of catastrophe bonds among large corporations and owners or holders of asset portfolios, which in time may stimulate more of these types of sponsors to come into the ILS market.

You can read all about the Logistics Cat Bond Re Ltd (Series 2021-1) and every other Cat Bond issue in Artemis Deals Guide.

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