Flood Re, the UK government-backed insurance industry- funded scheme aimed at improving the availability and affordability of flood insurance, has announced the successful completion of its debut catastrophe bond, Vision 2039 – Series 2025-1. The transaction marks Flood Re's entry into the catastrophe bond market, securing £140,000,000 in fully-collateralised UK flood retrocessional reinsurance.
The Vision 2039 cat bond, issued through the Lloyd’s insurance-linked securities (ILS) transformer structure London Bridge 2 PCC Limited, represents a significant milestone for Flood Re. The pioneering bond provides three years of retrocessional UK flood reinsurance, covering losses across England, Wales, Scotland and Northern Ireland.
The transaction strengthens the diversification of Flood Re’s reinsurance programme, marking a significant step in its broader risk transfer strategy for the next three years. By complementing traditional reinsurance partnerships with access to the wider capital markets through the bond, Flood Re is enhancing the scheme’s resilience and sustainability. The successful placement of Vision 2039 underscores the scheme’s commitment to innovation in risk management, ensuring that affordable flood insurance remains accessible to UK households facing the growing threat of flooding.
This is a crucial step as Flood Re equips itself to handle the increasing physical risks posed to UK households by climate change. Increased climate risk has led to a transformed and more expensive reinsurance market. This source of alternative private market risk transfer capacity is an important innovation for Flood Re in a world where climate risk will continue to rise.
The transaction is also a significant achievement for the broader UK financial services sector. Vision 2039 is the first UK flood risk indemnity cat bond brought to market and the first use of the London Bridge 2 vehicle by a non-Lloyd’s entity. It serves as an excellent example of the UK ILS regime's effectiveness and showcases the strength of London and the UK as a hub for financial services and climate resilience.
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Perry Thomas, CEO of Flood Re, commented: “We are pleased to announce the successful completion of our debut catastrophe bond, Vision 2039 – an innovative transaction that strengthens our reinsurance programme and enhances protection for UK households against flooding. This milestone expands our access to alternative private market risk transfer, and complements our wider traditional reinsurance structure reducing reliance on traditional reinsurance. Over time, we expect subsequent issuances to become even more cost-effective, improving programme efficiency. Developing our capability in this market supports Flood Re’s medium-term viability and long-term transition planning. As we move into a new era for the scheme, we remain committed to building lasting resilience and protection for future generations.”
Burkhard Keese, Chief Financial Officer, Lloyd’s, said: “I am delighted to see London Bridge 2 as the issuance vehicle for Flood Re’s inaugural Cat Bond, the first time it has been used to support the reinsurance of risk from a non-Lloyd’s insurer. Flood Re is an important element in the UK insurance industry’s response to flood risk and that includes the provision of flood reinsurance to multiple Lloyd’s syndicates. This is yet another milestone in LB2’s growth and development journey as a meaningful source of capital and risk transfer capacity, and we look forward to maintaining this momentum during 2025.”
Charles Whitmore, Co-Head of Global Clients, Guy Carpenter, said: “Guy Carpenter is proud to have supported Flood Re on their inaugural cat bond issuance. Following a well-planned marketing campaign, this ground-breaking cat bond, the first ever to cover UK nationwide flood risk, received strong backing from capital market investors. The cat bond has been designed to integrate seamlessly with the traditional reinsurance programme, offering UK policyholders comprehensive protection against the financial impact of any major flood event.”
Jennifer Tait, Partner, Willkie Farr & Gallagher, said: “Willkie was pleased to advise Flood Re on its inaugural catastrophe bond transaction, marking the first ever catastrophe bond in the UK designed to protect against flood losses on an indemnity trigger basis. This transaction is a significant milestone for Flood Re, further diversifying its reinsurance programme, and for UK households, ensuring the continued availability and accessibility of flood insurance. It also serves as a strong endorsement of the UK ILS regime and the London Bridge platform at Lloyd’s. The successful completion of this transaction was made possible through the invaluable support of Lloyd’s, London Bridge and the PRA.”
[Main image credit: Richard Hayman / shutterstock.com]