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Alternative finance: seeking out the ORB

Specialist marine and aviation underwriter Beazley turned to the LSE's order book for retail bonds (ORB) to raise funding. Jason Sinclair explores an increasingly popular alternative to bank finance.

In September 2012, Beazley became the first insurer to launch a fixed rate bond issue for retail investors on the nascent London Stock Exchange (LSE) order book for retail bonds (ORB). The bond issue raised £75m for the specialist insurer. That target was reached within just eight days of marketing. What made Beazley decide to use this method of financing?

And what can it tell us about the texture of the retail bond market? Beazley went public in 2003 and has used debt finance since 2006. Martin Bride, Beazley finance director, says: "We were looking at refinancing and knew that some companies had looked into retail bonds. Our financial advisers recommended that market and the board took the decision. It looked attractive because there was a potentially significant market, with people with money in ISAs and so on, who could look at this market and then buy into it in a straightforward process."

Quick take-up

Beazley insures and reinsures a vast portfolio of businesses through Lloyd’s of London, participating in the insurance of 20% of the world’s ocean-going tonnage, and with worldwide business in aviation, political risk, liability and property. Since its establishment in 1986, Beazley has grown into one of the largest Lloyd’s of London-based insurance and reinsurance groups, underwriting gross premiums of $1.7bn in 2011.

"It took four to six weeks from the decision for us to launch a prospectus," says Bride, "giving financial information signed off by auditors (as with institutional borrowing), and then going to the main distributors Lloyds Bank Debt Capital Markets and Numis Securities and sub-distributors".

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