Global insurance and reinsurance company Everest Re is set for a successful new catastrophe bond issuance, with the Kilimanjaro III Re Ltd. (Series 2022-1) transaction now having priced at the upsized $300 million, with a coupon fixed at the mid-point of initial guidance.
This is notable, as another sign of moderation in the widening of catastrophe bond spreads, with this Kilimanjaro Re 2022-1 deal being one of the only cat bonds to price within guidance this quarter, but the second to do so of late.
Signs of a moderating of cat bond spreads, or at least a halt to the incessant widening, began to emerge with Swiss Re’s latest Matterhorn Re deal and now Everest Re has also fixed its pricing within guidance, suggesting some equilibrium is returning to the cat bond market.
Everest Re returned to the catastrophe bond market earlier in June, seeking $250 million or more in multi-peril retro reinsurance protection from the capital markets from its latests Kilimanjaro Re issuance.
As we then reported, the target size was lifted, with up to $300 million of cover sought, while pricing looked set to complete within guidance.
Both of these targets have now been achieved, with the cat bond pricing at the upsized $300 million and pricing being fixed at the mid-point, sources have now told us.
As a result, this Kilimanjaro Re III cat bond will provide Everest Re with $300 million of coverage 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 an industry-loss trigger basis and the cat bonds are structured to provide Everest Re with a source of annual aggregate retro reinsurance protection, across a three-year term.
The $300 million of notes to be issued will have an initial attachment probability of 1.43% and an initial expected loss of 0.9%.
They were first marketed to cat bond investors with initial price guidance of 5% to 5.5%, and that guidance was subsequently fixed at the mid-point of that guidance, for a coupon of 5.25%, which is where we’re now told the notes have been priced.
It should be noted that this is a particularly low risk cat bond from Everest Re, with most of its Kilimanjaro series having far higher expected losses.
As a result, the multiple on this cat bond is quite high, at over 5 times EL, so while spread widening may have slowed or stopped, they remain very wide indeed still.