Bermudian reinsurance firm Everest Re is back with its latest catastrophe bond issuance, which sees the company bringing twin Kilimanjaro Re deals to secure at least $300 million of protection, from Kilimanjaro Re Ltd. (Series 2018-1) and Kilimanjaro Re Ltd. (Series 2018-2) issues, covering identical layers of risk but with different durations.
With its latest catastrophe bond Everest Re is looking to expand the amount of capital markets support the firm has from ILS investors, as well as replace and extend the coverage that its soon to mature $450 million Kilimanjaro Re 2014-1 transaction has provided.
As with its last cat bond issuance in April 2017, Everest Re is bringing two Series of notes to market at the same time, with one seeking four-years of collateralized reinsurance and retrocessional protection and the other five-years.
Aside from the durations, the two series of notes cover precisely the same layers of risk for Everest Re, but this practice is helping the reinsurer to lock-in capital markets protection for longer periods of time and also stagger the maturities of its catastrophe bonds.
In this twin issuance Everest Re is seeking at least $300 million of protection across the two series and the four tranches of notes, with all of the issuance set to provide it with fully-collateralized reinsurance and retro protection against losses from named storms and earthquakes across the U.S., Puerto Rico, U.S. Virgin Islands, District of Colombia and Canada.
The reinsurance protection will be provided using a weighted industry loss index trigger, based on data reported by PCS, and the coverage will be on an annual aggregate basis across the four and five-year terms of the notes.
Each series has one higher risk and one lower risk tranche of notes and aside from the term of the coverage every else remains the same.
The Series 2018-1 Class A-1 and Series 2018-2 Class A-2 notes, which are the higher risk layers, will target at least $50 million of cover across the pair and have an initial attachment probability of 8.97%, an initial expected loss of 8.5% and will be offered to investors with price guidance in a range from 13.25% to 14.25%.
The Series 2018-1 Class B-1 and Series 2018-2 Class B-2 notes, which are the lower risk layers, will target at least $250 million of coverage across the pair of tranches and have an initial attachment probability of 2.29%, an initial expected loss of 2.08% and will be offered to investors with price guidance in a range from 5% to 5.5%%.
Given the appetite for catastrophe bond issues among the investor base it’s likely these tranches will upsize and with the maturing 2014 cat bond $450 million it would be no surprise to see this deal equaling or beating that.
Everest Re currently has $2.825 billion of catastrophe bond coverage in-force and it will be interesting to see if this latest deal can cement the reinsurers place at the top of our cat bond sponsor leaderboard.
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