Everest Re’s Kilimanjaro Re cat bond grows to $450m with demand

by Artemis on April 15, 2014

The first catastrophe bond from new sponsor Everest Reinsurance Company, Kilimanjaro Re Ltd. (Series 2014-1), has increased in size by 80% to $450m and pricing guidance has dropped due to strong investor demand.

Sources said that the Kilimanjaro Re cat bond, through which Everest Re is looking to secure a source of retrocessional reinsurance protection for U.S. named storms and earthquakes, has seen robust investor demand leading to it being oversubscribed and as a result the deal has been lifted from the $250m it launched at to now offer $450m of notes.

The Kilimanjaro Re cat bond will provide Everest Re with per-occurrence and annual aggregate U.S. named storm protection and aggregate U.S. earthquake protection as well. Protection will be afforded on an industry loss basis, using a PCS index weighted by territory for both the per-occurrence and aggregate for each peril.

The deal launched with two tranches of notes equally sized at $125m. The Class A tranche of notes, which targets per-occurrence coverage for U.S. named storms in the states of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina and South Carolina, has doubled in size to $250m Artemis understands.

The Class B tranche of notes, which targets annual aggregate protection for U.S. named storms across a wider area of all U.S. Gulf and East coast states as well as aggregate earthquake protection across all the most exposed states in the U.S., has grown from $125m to now stand at $200m in size.

At the same time the pricing has been lowered on both tranches, once again providing a demonstration of where U.S. property catastrophe reinsurance and retrocession rates are likely headed at the mid-year renewals.

The Class A per-occurrence notes were launched to investors with an interest spread coupon of 5.25% to 5.75%. That has now been lowered down to a range of 4.75% to 5.25%, so below the original range.

The Class B aggregate notes were initially offered with an interest spread coupon of 5% to 5.5% but that also has dropped to below the launch range, Artemis understands. These notes are now said to be offered with a price guide range of 4.5% to 5%.

Investors continue to show strong demand for any new catastrophe bond issuance, helping to drive down pricing and spreads, while increasing the issuance size for the sponsors. Yet again a first time sponsor of a cat bond will realise significant benefits in terms of the cost-effectiveness of its first transaction. Everest Re will no doubt be delighted with how the marketing of its first cat bond is going.

By increasing to $450m in size the Kilimanjaro Re cat bond is now the largest single issuance so far in 2014. It will be interesting to see whether it is beaten for size by the Everglades Re Ltd. (Series 2014-1) which is also marketing right now.

The  Kilimanjaro Re Ltd. (Series 2014-1) catastrophe bond transaction from Everest Re is expected to be priced later this week and will complete late next week, Artemis understands.

We will update you as it moves towards completion and you can find full details on this and every other catastrophe bond in the Artemis Deal Directory.

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