Kilimanjaro II Re Ltd. (Series 2024-1)

Everest Re is back in the catastrophe bond market for what will be the thirteenth issuance from the reinsurance company that we have tracked and listed in our Deal Directory.

For this new issuance in 2024, Everest Re has reverted to use a Bermuda based issuer named Kilimanjaro II Re Ltd., which it last utilised for a catastrophe bond in 2017, we understand.

Kilimanjaro II Re Ltd. is aiming to issue two tranches of Series 2024-1 notes, that will be sold to investors and the proceeds used to collateralize retrocessional reinsurance agreements with Everest Re.

The cat bond notes will fund coverage for Everest Re against certain losses from named storms and earthquakes that impact the United States, Puerto Rico, U.S. Virgin Islands, D.C., and Canada.

The retrocessional reinsurance protection will be on a regionally weighted industry-loss trigger basis and the cat bond notes are structured to provide Everest Re with a source of per-occurrence protection.

The $150 million or more of notes on offer will provide four years of protection to Everest, running to July 10th 2028, we are told.

The Class A tranche of notes are currently $50 million in size, come with an initial attachment probability of 1.84%, an initial base expected loss of 1.67% and are being offered to cat bond investors with price guidance in a range from 7.25% to 8.25%.

The Class B tranche of notes are currently $100 million in size and riskier, sitting lower down, with an initial attachment probability of 2.29%, an initial base expected loss of 2.03% and are being offered to cat bond investors with price guidance in a range from 8.25% to 9.25%, our sources said.

Given the payout factors involved, the attachment points of $5.1 billion for the Class B notes and $5.7 billion for the Class A’s are less meaningful.

But, we are told these notes are relatively remote in terms of risk, with risk modelling suggesting that even a repeat of the Great Miami hurricane not attaching the coverage, although a repeat of the 1906 San Francisco earthquake models out to cause a total loss of principal, we understand.

Update 1:

Signalling a positive response from the cat bond investor base, Everest has now lifted its target for retrocession from this new cat bond to as much as $225 million.

At the same time the price guidance has been lowered and the settlement date pulled forward more than a week into June, reflecting strong market issuance conditions at this time.

The Kilimanjaro II Re Ltd. Series 2024-1 Class A tranche of notes launched with a $50 million target, which we’re now told is aimed higher to secure up to $75 million of protection.

The Class A notes have an initial base expected loss of 1.67% and were initially offered to cat bond investors with price guidance in a range from 7.25% to 8.25%, but we’re now told that guidance has been lowered to a new range of 6.25% to 7.25%.

The Kilimanjaro II Re Ltd. Series 2024-1 Class B tranche of notes launched targeting $100 million in cover for Everest, which we’re now told has increased to up to $150 million.

The Class B notes are riskier, sitting lower down, with an initial base expected loss of 2.03% and were at first offered to cat bond investors with price guidance in a range from 8.25% to 9.25%, but we’re now told this guidance has also fallen to a new range of 7.25% to 8.25%.

Update 2:

The Class A notes were priced at $75 million in size, with a spread of 6.25%.

The Class B notes were priced at $125 million in size, with a spread of 7.25%.

Both prices were fixed at the low-end of the reduced guidance, representing a roughly 19% and 17% drop in price from the mid-points of initial guidance, respectively.