Kilimanjaro Re Ltd. (Series 2015-1) – Full details:
With this Kilimanjaro Re 2015-1 issuance, Artemis understands that Everest Re is looking to expand the fully-collateralized retrocessional reinsurance cover it receives from the capital markets. The notes issued, which will be in two tranches, will both have a four-year term and both provide cover across the U.S., Canada, District of Columbia and Puerto Rico.
So Kilimanjaro Re 2015-1 comes out of the blocks at $300m in size, split into two tranches of notes, each of which are exposed to the same perils across the covered area. Both tranches of notes will provide per-occurrence reinsurance protection to Everest Re and both use a location-weighted industry loss trigger, based on data reported by Property Claim Services (PCS).
The first tranche, a Kilimanjaro Re 2015-1 Class D tranche of notes, has a preliminary size of $125m. The Class D tranche has an initial index attachment point of $1.257 billion, covering a pro-rata share of losses up to an exhaustion point of $1.816 billion.
The second, Class E tranche of notes has a preliminary size of $175m and are the less risky of the two, with an initial index attachment point of $1.841 billion covering up to exhaustion at $2.521 billion.
The Class D notes have an initial attachment probability of 6.25%, we understand, with an initial expected loss of 4.71% (5.25% on a WSST sensitivity basis). This $125m tranche is being marketed to investors with price guidance of 9% to 9.75%, we’re told.
The Class E tranche meanwhile have an initial attachment probability of 3.58% and an initial expected loss of 2.7% (3% on a WSST sensitivity basis). This $175m tranche is being marketed to the investor base with price guidance in a range of 6.5% to 7%.
In terms of the multiple, or ratio of expected loss to potential pricing giving a view of the risk/return characteristics of the cat bond tranches, both are roughly aligned with recent issuance.
The Class D tranche, with has a multiple at the mid-point of price guidance of 1.99x at the base case, or 1.79x at the sensitivity case. The Class E tranche has a multiple at the mid-point of price guidance of 2.5x at the base case and 2.25x at the sensitivity case.
Update 1:
The Kilimanjaro Re 2015-1 catastrophe bond more than doubled to $625m while marketing.
The Class D tranche, which is the riskier of the two, grew to $300 million in size, while the Class E tranche has upsized to $325 million.
As well as upsizing to $625 million in size, the price guidance for both tranches of Kilimanjaro Re 2015-1 notes was fixed.
When the deal launched the Class D tranche had spread guidance of 9% to 9.75%, making it one of the highest coupon cat bond offerings for quite a while. We understand that the guidance has now been fixed at 9.25%, so towards the lower end and just below the mid-point of guidance.
Conversely, the Class E tranche which is now the largest, and lower risk, looks set to price at the mid-point. This tranche launched with price guidance of 6.5% to 7%, but we understand that has been fixed at 6.75%.
At 9.25% the Class D tranche of notes would pay ILS investors a multiple of 1.96 times the expected loss of 4.71%. The Class E tranche, at 6.75%, would pay investors a multiple of 2.5 times the expected loss of 2.7%.
Update 2:
The deal priced at the above levels, with the $300m Class D tranche offering a coupon of 9.25% and the $325m Class E tranche 6.75%.
View all of our Artemis Live video interviews and subscribe to our podcast.
All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.
Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.