2014 cat bond issuance hits $7.143 billion with Kilimanjaro Re 2014-2

by Artemis on November 18, 2014

The settlement and completion of the $500m Kilimanjaro Re Ltd. (Series 2014-2) catastrophe bond today takes 2014 issuance of new cat bonds and insurance securitisations to $7.143 billion, keeping the market on track for a possible record year.

The Kilimanjaro Re 2014-2 cat bond, sponsored by Bermuda based insurance and reinsurance firm Everest Re, was well-received by the ILS investor community. The cat bond grew in size by 43% during the marketing phase, from $350m at launch to complete as Everest Re’s largest cat bond yet offering the reinsurer $500m of fully-collateralized reinsurance protection.

With the completion of Kilimanjaro Re 2014-2, Everest Re now has $950m of catastrophe bond coverage in-force at this time. This makes the reinsurer the sixth largest cat bond sponsor in the outstanding market, according to our data.

With the completion and settlement of the cat bond today, Everest Re now benefits from a $500m source of protection on a  per-occurrence basis from earthquakes (including fire following) in all 50 U.S. states, the District of Columbia, Puerto Rico, and all provinces and territories of Canada. The protection is structured using a PCS industry loss index trigger.

The protection from this cat bond will last five years for Everest Re, which is its longest duration cat bond to-date as the previous deal Kilimanjaro Re Ltd. (Series 2014-1) was a four-year duration cat bond. Over 50% of the exposure from this cat bond is focused on California earthquake risks, which is no surprise given the importance of that State as an earthquake risk zone in the reinsurance market.

The transaction saw the single tranche of $500m of Series 2014-2 notes price at 3.75% mark, which set the cat bond’s multiple at approximately 2.6 times the expected loss figure of 1.46%.

Everest Re continues to leverage third-party reinsurance capital within its business, both in terms of protection and laying off risk in cat bonds, as well as in sharing risks with investors through its growing Mt. Logan Re sidecar. With the sidecar having grown to approximately $480m recently, Everest Re is utilising around $1.43 billion of third-party and ILS capital within its reinsurance business now.

The completion of Everest Re’s latest cat bond takes it among the top ten sponsors in the currently outstanding market. Everest Re now sits as the sixth biggest sponsor of outstanding cat bonds, with $950m of risk capital outstanding from 2 transactions and three tranches of notes.

With this deals completion taking 2014 catastrophe bond and ILS new issuance to $7.134 billion, we see this year destined to beat 2013’s figure of $7.642 billion. Currently there is another $500m, at least as the two deals still in the market could grow, of new issuance yet to complete which would take the total to $7.634 billion so just shy of 2013.

We understand that there are a number of new deals readying for launch before year-end. The question will be, how many of those deals can launch and settle before the end of the year to take the issuance figure even higher. $8 billion certainly seems possible, as we’d maybe only need one more deal on top of the two in the market to complete in 2014. $9 billion seems perhaps less likely as that would require a flurry of deals, or a couple of very big ones, to get completed before we roll into 2015.

Reports suggest that a number of cat bond issues have been held back a few weeks as sponsors establish the best mix of traditional and alternative capacity for their programmes, given the impending January reinsurance renewals.

You can read all about Kilimanjaro Re Ltd. (Series 2014-2) in our catastrophe bond Deal Directory.

The $500m of risk capital from this deal has been included in all of our catastrophe bond and ILS market statistics. View the breakdown of the market in our range of charts, allowing you to analyse the cat bond market.

Artemis’ Q3 2014 Catastrophe Bond & ILS Market Report – A lazy summer for ILS

Artemis Q3 2014 Catastrophe Bond & ILS Market Report - A lazy summer for ILSWe’ve now published our Q3 2014 catastrophe bond & ILS market report.

This report reviews the catastrophe bond and insurance-linked securities (ILS) market at the end of the third-quarter of 2014, looking at the new risk capital issued and the composition of the cat bond & ILS transactions completed during Q3 2014.

Download your copy here.

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