Everest Re gets $850m cover from new Kilimanjaro Re catastrophe bonds

Everest Re has now secured an $850 million slice of retrocessional reinsurance protection from the capital markets with its latest dual issuance of two series of notes from its Kilimanjaro Re Ltd. cat bond issuance vehicle.

Everest Re returned to the cat bond market in November with its first issuance since April 2018 and true to form brought a range of offerings in four tranches of insurance-linked notes across two different series issued, Kilimanjaro III Re Ltd. (Series 2019-1) and Kilimanjaro III Re Ltd. (Series 2019-2).

Now, we’re told the issuance is going to complete to provide the global insurance and reinsurance firm with an $850 million multi-year source of collateralised, capital markets backed retrocession, significantly larger than the initial offering size.

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

A positive investor response then helped Everest Re to lift its ambitions, with the target rising to between $500 million and $800 million of coverage, but in the end the re/insurer opted for slightly more, to secure the $850 million of protection.

The deal sees the two series offering different tenures of coverage, with the Kilimanjaro III Re 2019-1 series of cat bond notes designed to  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.

Within each series are two tranches of notes, with A-1 and A-2 tranches set to provide per-occurrence protection, while B-1 and B-2 tranches of notes will provide Everest Re with annual aggregate coverage.

All four tranches of notes across the two series will provide Everest Re with retrocessional 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.

We now understand that 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).

Overall this looks like a good result for Everest Re, as it maximised on the size of the issuance and pricing came in within guidance, although clearly in the upper-half of it.

Compared to previous Everest Re sponsored cat bonds, this latest transaction saw its coupons fixed at levels roughly one-fifth higher than comparable layers of risk, reflecting cat bond investors appetite for higher returns following recent loss years.

Issuance for these Kilimanjaro III Re Ltd. (Series 2019-1) and Kilimanjaro III Re Ltd. (Series 2019-2) catastrophe bond transactions is targeted for later this week.

You can read all about these transactions from Everest Re and every cat bond transaction ever issued in the Artemis Deal Directory.