Everest Re secures $650m Kilimanjaro III cat bond at reduced pricing

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Everest Re, the globally active insurance and reinsurance company, has now finalised the pricing on the latest $650 million of fully-collateralized retrocessional reinsurance protection from its Kilimanjaro Re catastrophe bond program at the low-end of already reduced guidance.

Everest Re logoCatastrophe bond market pricing trends on newly issued deals continues to settle at or below the lower-ends of spread guidance in the second-quarter of 2021, following the direction set in the first-quarter of this year.

Everest Re returned to the catastrophe bond market seeking support from insurance-linked securities (ILS) investors for a potential $800 million issuance of two series of Kilimanjaro III Re Ltd. 2021 cat bonds recently, as we’ve been reporting.

In the end the company settled for issuances of $650 million of notes across the two series and six tranches of cat bonds being issued by its Bermuda SPI, named Kilimanjaro III Re Ltd.

This is coming in two issues, 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 designed to provide five-year protection.

The deal was fixed so that the reinsurance protection from the Series 2021-1 bonds, with a four-year term, will amount to $320 million, while the protection from the Series 2021-2 bonds, with a five-year term, is slightly greater at $330 million.

The $650 million of notes will be sold to cat bond investors and the proceeds used to collateralize reinsurance agreements between the SPI Kilimanjaro III Re Ltd. and Everest Re.

These new cat bonds will provide Everest Re with $650 million of protection against certain losses from named storms and earthquakes that impact the United States, Puerto Rico, U.S. Virgin Islands, D.C., and Canada.

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

Now, the notes have all been priced at what look to be attractive terms for Everest Re.

The Kilimanjaro III Re Ltd. Series 2021-1 issuance will provide four-years of protection to April 2025, and consists 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.

The Kilimanjaro III Re Ltd. Series 2021-2 issuance will provide five-years of protection to April 2026, and consists of $150 million of A-2 notes providing per-occurrence protection, as well as $90 million of B-2 notes and $90 million of C-2 notes providing annual aggregate protection, for total coverage of $330 million.

The A-1 and A-2 tranches of per-occurrence notes have an expected loss of 7.21% and were first offered to investors with price guidance in a range from 12% to 12.25%. That guidance was subsequently lowered to between 11.25% and 12%, with this now finalised at the lowest-end of 11.25%, sources told us.

The B-1 and B-2 tranches of notes, with an expected loss of 1.89%, were first offered to investors with price guidance in a range from 5% to 5.75%. The guidance for these tranches of notes was also lowered to 4.5% to 5% and has now been finalised, again at the lowest-end, at 4.5% for each tranche.

Finally, the C-1 and C-2 tranches of notes, with an expected loss of 1.57%, were first offered to investors with price guidance in a range from 4.75% to 5.5%, which then dropped to 4.25% to 4.75%. The pricing for these tranches has now also been finalised at the lowest-end of 4.25%, we understand.

As a result, pricing on the A1 and A2 tranches fell by roughly 7%, pricing for the B1 and B2 tranches fell 16% and pricing on the C1 and C2 notes fell by roughly 17%, all from their initial mid-points of guidance.

Which reflects recent pricing trends in the market for new catastrophe bond issues, with investor appetite remaining strong and helping sponsors like Everest Re secure their coverage at attractive pricing, representing strong deal execution.

These Kilimanjaro III Re Ltd. (Series 2021-1) and Kilimanjaro III Re Ltd. (Series 2021-2)catastrophe bond transactions are scheduled for issuance around mid-April.

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.

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