Prologis is seeking to renew US Logistics Re's $95 million logistics catastrophe bond

Prologis, Inc., a landlord and real estate investor focused on logistics, warehousing and supply chain services, returns to the catastrophe bond market for a second time, as it looks to sponsor Logistics Re Ltd's $95 million US earthquake. (Series 2024-1) Concentrated issue, as a renewal of the first CAT bond. Prologis ventured into the catastrophe bond market for the first time in the fourth quarter of 2021, as the company sought to secure property insurance protection from capital market investors through insurance-linked bonds. stock market (ILS) for the first time.

This first venture into cat bonds saw Prologis secure US$95 million of earthquake-focused property catastrophe insurance protection over a multi-year period through the successful issuance of Logistics Re Ltd cat bonds. (Series 2021-1).

Prologis operates as a real estate investment trust, owning and investing in commercial real estate assets, typically associated with the warehousing, logistics and supply chain sectors with a US focus, although it has some global operations as well.

Artemis has learned that the first Logistics Re cat bonds issued in 2021 are due to mature in December this year, so the company has now returned to sponsor renewal.

Using the same special purpose insurer (SPI) called Logistics Re Ltd., based in Bermuda, Prologis is seeking to sponsor a second catastrophe bond to provide it with access to capital markets for catastrophe insurance protection.

As with the first cat bond, we understand that again in this case, insurance protection from Logistics Re Ltd will be graded. SPI, via global reinsurer Hannover Re, through its captive insurer Prologis Solution Insurance Ltd. And to the shepherd herself.

Therefore, Logistics Re Ltd. will endeavor to To the issuance of a single $95 million tranche of Series A Catastrophe Bond Notes 2024-1 which will be sold to cat bond investors and the proceeds used to underwrite the retroactive reinsurance agreements between the SPI issuer and Hanover Re.

Hannover Re will then provide reinsurance directly to the captive insurer Solution Insurance Ltd. Which in turn will insure Prologis, Inc.

The $95 million Series 2024-1 Series A notes issued by Logistics Re are designed to provide Prologis with a source of just over three years of U.S. earthquake insurance protection on an indemnity and per-accident basis, with maturity set at mid December 2027, we're told.

There may be some overlap in coverage among cat bonds at that time, as the 2021 issuance matures around that December period, but the new 2024 cat bond issue is expected to settle in October.

As with the First Logistics Catastrophe Bond, we recognize that exposure is largely concentrated in California, with assets covered there contributing up to 95% of the expected loss, the same as the first deal.

The Logistics Re Series 2024-1 Series A bonds will have a tie-point of $400 million of losses for Prologis' insurance tower and cover a percentage of losses of up to $550 million, the sources said.

Which gives these new Logistics Bonds an initial correlation probability of 3.1%, an initial expected loss of 2.6%, and we're told they're being offered to cat bond investors with price guidance of 6.75% to 7.25%.

There appears to have been some change in exposure to the covered subject, as the first Logistics Re cat bond was associated with a $350 million loss and reached the same exhaustion point, but the expected loss was only 1.094% upon issuance.

We understand that the Cat Logistics Re 2021-1 bond had its expected loss rise to 1.34% at the latest reset, so it appears that Prologis has built exposure in terms of assets in the covered area, likely largely in California given the expected loss concentration there.

It is encouraging to see Prologis back and looking to renew the insurance protection backed by catastrophe bonds, and this should continue to increase awareness of catastrophe bonds as a risk capital transfer tool among large corporations, as well as owners or holders of portfolios of catastrophe-exposed assets, which over time may serve to Motivating more of these types of sponsors to venture into the ILS market for issuer protection.

You can read all about Logistics Re Ltd's disaster bonds. (Series 2024-1) and every other Cat Bond release in our comprehensive Artemis Deals Guide.

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