Kilimanjaro III Re Ltd. (Series 2021-1)

This Kilimanjaro Re III Ltd. (Series 2021-1) issuance of notes is part of Everest Re’s first catastrophe bond since late 2019, as the company demonstrates its desire to replace at least part of its maturing cat bond retrocessional reinsurance protection.

Like other recent cat bond issuances from Everest Re, this Kilimanjaro III Re 2021 placement features two series, each with three tranches of notes, with the only difference between the series being the tenure of coverage.

Everest Re will sponsor a Kilimanjaro III Re Ltd. (Series 2021-1) and Kilimanjaro III Re Ltd. (Series 2021-2) catastrophe bond issuance, with the Series 2021-1 bonds having a four-year term and the Series 2021-2 bonds being a five-year deal, sources told Artemis.

The reasons for this will be two-fold, firstly that Everest Re can stagger its renewals of cat bond protection and secondly that the company can test cat bond fund and investor appetite for the longer-duration covers, potentially allowing it to lock-in retro reinsurance for longer.

So, Kilimanjaro III Re Ltd., a Bermuda SPI, will issue six tranches of notes across the two series, that will be sold to cat bond investors and the proceeds used to collateralize reinsurance agreements between the SPI and Everest Re.

The protection these new cat bonds will afford Everest Re will be for the same perils as other recent Kilimanjaro Re cat bonds, in covering certain losses from named storms and earthquakes impacting the United States, Puerto Rico, U.S. Virgin Islands, D.C., and Canada.

The retrocessional reinsurance protection will on an industry-loss trigger basis and the cat bonds are structured to provide Everest Re with a source of both per-occurrence and annual aggregate reinsurance protection.

So, the Kilimanjaro III Re Ltd. Series 2021-1 issuance (featuring notes ending in 1) will provide four-years of protection to April 2025, while the Series 2021-1 issuance (featuring notes ending in 2) will provide five-years of protection, to April 2026.

The A-1 and A-2 tranches of notes will provide per-occurrence reinsurance protection and each targets $150 million, we understand. These two tranches of notes have an expected loss of 7.21% and being offered to investors with price guidance in a range from 12% to 12.25%.

The B-1 and B-2 tranches of notes will provide annual aggregate reinsurance cover and are targeting $125 million in terms of issuance size each. These two tranches of notes have an expected loss of 1.89% and being offered to investors with price guidance in a range from 5% to 5.75%.

Finally, the C-1 and C-2 tranches of notes will also offer annual aggregate protection and are targeting another $125 million in terms of size, per tranche. These two tranches of notes have an expected loss of 1.57% and being offered to investors with price guidance in a range from 4.75% to 5.5%.

So the total per-occurrence protection target, across the Series 2021-1 A-1 and Series 2021-2 A-2 notes is $300 million.

While the aggregate cover could amount to $250 million across the Series 2021-1 B-1 and Series 2021-2 B-2 notes and another $250 million across the Series 2021-1 C-1 and Series 2021-2 C-2 notes.

Giving a total initial target size of $400 million per-series for this visit to the catastrophe bond market of $800 million, which could rise given the $950 million of Kilimanjaro Re 2017-1 cat bonds set to mature soon.

Update 1:

The target size for this issuance was reduced, with the Kilimanjaro III Re Ltd. Series 2021-1 issuance, which will provide four-years of protection to April 2025, now made up of $150 million of A-1 notes providing per-occurrence protection, as well as $85 million of B-1 notes and $85 million of C-1 notes providing annual aggregate protection, for total coverage of $320 million.

Price guidance has also been lowered, with the A-1 notes price guidance lowered to 11.25% to 12%, the B-1 notes guidance lowered to 4.5% to 5% and the C-1 notes guidance has also dropped to 4.25% to 4.75%.

Update 2:

The pricing for the $320 million of notes issued under this Series 2021-1 issuance was eventually finalised at 11.25% for the A-1 notes, 4.5% for the B-1 notes and 4.25% for the C-1 notes, all at the lowest-end of already reduced guidance.

That represents a roughly 7% decline in price for the A-1 notes, 16% for the B-1 notes and 17% for the C-1 notes, all from their initial mid-points of guidance.