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Kilimanjaro III Re Ltd. (Series 2019-2)

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Kilimanjaro III Re Ltd. (Series 2019-2) – At a glance:

  • Issuer: Kilimanjaro III Re Ltd.
  • Cedent / sponsor: Everest Re
  • Placement / structuring agent/s: Aon Securities is sole structuring agent and bookrunner
  • Risk modelling / calculation agents etc: AIR Worldwide
  • Risks / perils covered: U.S., Puerto Rico, U.S. Virgin Islands, D.C., Canada named storm and earthquake
  • Size: $425m
  • Trigger type: Industry loss index
  • Ratings: NR
  • Date of issue: Dec 2019

Kilimanjaro III Re Ltd. (Series 2019-2) – Full details:

Everest Re has returned to the catastrophe bond market with another of its twin issuances, bringing a Kilimanjaro III Re Ltd. (Series 2019-1) and a Kilimanjaro III Re Ltd. (Series 2019-2) transaction to cat bond investors at the same time.

It’s Everest Re’s first cat bond sponsorship since April 2018 and sees the reinsurer looking to top up its sources of fully collateralised and capital markets backed reinsurance as some of its older cat bond coverage is set to mature before year-end.

Each transaction will feature two tranches of notes, Series 2019-1 Class A-1 and Class B-1, and Series 2019-2 Class A-2 and Class B-2

The difference between the two series is down to the length of the coverage, with the 2019-1 series notes issued by Kilimanjaro Re set to provide the company with catastrophe reinsurance protection across a four-year term, while the 2019-2 series notes will provide a five-year term of coverage.

All four tranches of notes across the two series will provide Everest Re with retro reinsurance protection against certain losses caused by named storms and earthquakes hitting the U.S., Puerto Rico, U.S. Virgin Islands, D.C. and Canada.

All coverage is on an industry loss trigger basis, which will be territory weighted and based on data reported by PCS.

The A-1 and A-2 notes will provide the per-occurrence protection, while the B-1 and B-2 notes will provide annual aggregate coverage.

With the 2019-1 A1 and 2019-2 A2 notes, which are structured for per-occurrence protection, Everest Re is seeking at least $125 million of reinsurance coverage.

The per-occurrence notes will cover a roughly $465 million layer of Everest Re’s program, with an initial expected loss of 8.47% at the base case, we’re told. These tranches are being offered to investors with coupon price guidance in a range from 15% to 16%.

The 2019-1 B1 and 2019-2 B2 notes are seeking more coverage at $250 million plus and are the ones with aggregate exposure, with both featuring a franchise deductible of $100 million per-event, we understand.

The aggregate notes of these transactions will cover an almost $1.2 billion layer of Everest Re’s retro reinsurance tower, with an initial expected loss of 3.81% and are being offered to investors with coupon price guidance in a range from 8.75% to 9.75%.

Update 1:

Everest Re has lifted its targets for its latest catastrophe bond issuances, with the company now hoping to secure between $500 million and $800 million of retrocessional reinsurance from the Kilimanjaro Re III transactions.

Everest Re is now seeking between $175 million and $300 million of protection across the A-1 and A-2 tranches of notes and $between $325 million and $500 million across the B-1 and B-2 tranches.

At the same time as increasing the targeted size of the issuance, the pricing guidance has been narrowed.

The two per-occurrence tranches, A-1 and A-2, had been offered to investors with pricing in a range from 15% to 16%, but we’re told this has moved towards the upper-end at 15.75% to 16%.

Meanwhile, the aggregate tranches, so B-1 and B-2, which were initially offered with coupon guidance of 8.75% to 9.75%, have seen their pricing rise towards the upper-end as well, with the latest guidance 9.5% to 9.75%.

As a result, all four tranches look likely to execute it seems, but the precise sizes is not yet clear and exactly how Everest Re chooses to go will likely depend on pricing and how it compares with other sources of retrocession.

Update 2:

Everest Re eventually settled for $425 million of collateralised retrocessional reinsurance protection from each of the two series issued, Kilimanjaro Re 2019-1 and 2019-2, securing in total a significant $850 million of cover from this single visit to the catastrophe bond market.

The 2019-1 Class A-1 and 2019-2 Class A-2 tranches of per-occurrence notes have both been fixed at $150 million in size and with pricing finalised at 15.75%, which is in the middle of the upper-half of the guide pricing range (which was 15%-16%).

Meanwhile, the 2019-1 Class B-1 and 2019-2 Class B-2 tranches of annual aggregate notes will both be $275 million in size and their pricing has been fixed at 9.5%, which is again in the middle of the upper-half of initial guidance (which was 8.75% to 9.75%).

So, now pricing has been fixed and allocations arranged across the two series, giving us a picture of exactly how much protection Everest Re has secured, which has turned out to be $425 million of protection across a four-year term and $425 million of five-year coverage as well.

Within this, Everest Re has secured more annual aggregate protection that per-occurrence, in fact the two aggregate tranches (B-1 and B-2) will amount to $550 million of the issuance, while per-occurrence amounts to $300 million (A-1 and A-2).

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