S&P assigns preliminary ratings to Kilimanjaro Re cat bond

by Artemis on April 21, 2014

Preliminary ratings have now been assigned to the first catastrophe bond from new sponsor Everest Reinsurance Company, Kilimanjaro Re Ltd. (Series 2014-1), which grew to $450m as investor demand helped the reinsurer increase the cover the cat bond will provide.

Standard & Poor’s Ratings Services said on Friday that it has assigned a preliminary rating of ‘BB-(sf)’ to both of the Series 2014-1 Class A and Class B notes to be issued by Kilimanjaro Re Ltd.

The Kilimanjaro Re cat bond grew in size to $450m, making the Class A tranche of notes now $250m in size, double the size it launched at, and the Class B tranche of notes $200m, up from the $125m it launched at.

S&P notes in its preliminary rating statement that the $250m of Class A notes cover losses on a per-occurrence basis from U.S. named storms, and the $200m of Class B notes cover losses on an annual aggregate basis from named storms and earthquakes (including fire following) in the covered area. The Class B notes feature an initial franchise deductible amount of $110 million.

The Class A tranche of notes, targets per-occurrence retrocessional coverage for Everest Re for U.S. named storms in the states of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina and South Carolina, between an attachment point of $1.40 billion and an exhaustion point of $2.15 billion.

The Class B tranche of notes, 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., between an attachment point of $2.15 billion and an exhaustion point of $2.90 billion.

Interestingly, looking at the details in S&P’s pre-sale report, the Kilimanjaro Re catastrophe bond looks to be predominantly exposed to Florida hurricanes, particularly for the Class A tranche of notes which is practically a Florida wind bond.

S&P’s pre-sale report includes other additional information on the structure of the Kilimanjaro Re Ltd. (Series 2014-1) catastrophe bond, some of which has now been included in our Deal Directory entry for this transaction.

The Kilimanjaro Re cat bond is expected to close later this week.

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