Flood Re, the UK government-backed insurance scheme designed to improve the availability and affordability of flood insurance, has completed its first catastrophe bond, Vision 2039 – Series 2025 – 1.
The transaction marks Flood Re’s entry into the catastrophe bond market, securing £140 million in fully collateralised UK flood retrocessional reinsurance.
Issued through the Lloyd’s insurance-linked securities (ILS) transformer structure, London Bridge 2 PCC Limited, the Vision 2039 cat bond provides three years of retrocessional UK flood reinsurance, covering losses across England, Wales, Scotland and Northern Ireland.
The transaction expands Flood Re’s reinsurance programme, integrating capital market solutions alongside traditional reinsurance. By diversifying its risk transfer approach, the scheme aims to enhance resilience and ensure the continued availability of affordable flood insurance for UK households facing increasing flood risks.
Flood Re said this development is a response to the rising physical risks posed by climate change. As climate-related events drive changes in the reinsurance market, alternative sources of risk transfer capacity are becoming increasingly important.
The transaction is also a milestone for the UK financial services sector. Vision 2039 is the first UK flood risk indemnity cat bond and the first time the London Bridge 2 vehicle has been used by a non-Lloyd’s entity.
“This milestone expands our access to alternative private market risk transfer, and complements our wider traditional reinsurance structure reducing reliance on traditional reinsurance,” said Perry Thomas, recently appointed CEO of Flood Re. “Over time, we expect subsequent issuances to become even more cost-effective, improving programme efficiency.”
Meanwhile, Lloyd’s CFO Burkhard Keese described the launch as “another milestone” in London Bridge 2’s growth as a “meaningful” source of capital and risk transfer capacity. “[W]e look forward to maintaining this momentum during 2025,” he added.
The demand for catastrophe bonds has grown in the past couple of years, as extreme weather events are becoming more frequent. The Swiss Re Global Cat Bond Index rose 17% in 2024, following a record 20% gain in 2023.
