Everest Re aims for up to $800m from Kilimanjaro III Re cat bonds

Global insurance and reinsurance firm 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.

At the same time as lifting the target for the cat bonds, the pricing guidance has been narrowed and shifted towards the upper-end, reflecting investor ambitions for higher cat bond yields.

Everest Re returned to the catastrophe bond market in November, bringing another twin series issuance of Kilimanjaro III Re Ltd. (Series 2019-1) and Kilimanjaro III Re Ltd. (Series 2019-2) to cat bond investors at the same time.

Each transaction features 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 and the only difference between the two series is the tenure of coverage.

So, Everest Re is looking to secure both per-occurrence and annual aggregate retrocessional reinsurance protection with these cat bonds, the first time it has sought both types of protection at the same time from its Kilimanjaro series of cat bonds.

When the deal launched it was targeting $375 million or more of coverage from across the four tranches of notes.

Now, we understand, that thanks to a positive investor response to the deal, Everest Re has lifted its ambitions and is targeting at least $500 million of coverage, but perhaps as much as $800 million if it can secure the top-end of its new target.

As a reminder, the 2019-1 series of cat bond notes to be issued by Kilimanjaro III Re will provide Everest Re with catastrophe reinsurance protection across a four-year term, while the 2019-2 series notes will provide a five-year term source 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, 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.

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.

It would be encouraging for the market to see this deal complete towards the $800 million upper-end of the new target range, as it will be the largest catastrophe bond issue for some time and a show of confidence from a major sponsor of cat bonds, as well as the investor base.

We should have a better idea of exactly how the allocations pan out with these cat bonds next week, but for now we’ve listed the two series as being up to $400 million in size each.

Issuance for these Kilimanjaro III Re Ltd. (Series 2019-1) and Kilimanjaro III Re Ltd. (Series 2019-2) catastrophe bond transactions is targeted for December 12th, we understand.

We will update you as they come to market and you can read about every cat bond transaction ever issued in the Artemis Deal Directory.