S&P assigns preliminary ratings to Kilimanjaro Re cat bond


Preliminary ratings have now been assigned to the first catastrophe bond from new sponsor Everest Reinsurance Company, Kilimanjaro Re Ltd. (Series 2014-1), which grew to $450m as investor demand helped the reinsurer increase the cover the cat bond will provide.

Standard & Poor’s Ratings Services said on Friday that it has assigned a preliminary rating of ‘BB-(sf)’ to both of the Series 2014-1 Class A and Class B notes to be issued by Kilimanjaro Re Ltd.

The Kilimanjaro Re cat bond grew in size to $450m, making the Class A tranche of notes now $250m in size, double the size it launched at, and the Class B tranche of notes $200m, up from the $125m it launched at.

S&P notes in its preliminary rating statement that the $250m of Class A notes cover losses on a per-occurrence basis from U.S. named storms, and the $200m of Class B notes cover losses on an annual aggregate basis from named storms and earthquakes (including fire following) in the covered area. The Class B notes feature an initial franchise deductible amount of $110 million.

The Class A tranche of notes, targets per-occurrence retrocessional coverage for Everest Re for U.S. named storms in the states of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina and South Carolina, between an attachment point of $1.40 billion and an exhaustion point of $2.15 billion.

The Class B tranche of notes, targets annual aggregate protection for U.S. named storms across a wider area of all U.S. Gulf and East coast states as well as aggregate earthquake protection across all the most exposed states in the U.S., between an attachment point of $2.15 billion and an exhaustion point of $2.90 billion.

Interestingly, looking at the details in S&P’s pre-sale report, the Kilimanjaro Re catastrophe bond looks to be predominantly exposed to Florida hurricanes, particularly for the Class A tranche of notes which is practically a Florida wind bond.

S&P’s pre-sale report includes other additional information on the structure of the Kilimanjaro Re Ltd. (Series 2014-1) catastrophe bond, some of which has now been included in our Deal Directory entry for this transaction.

The Kilimanjaro Re cat bond is expected to close later this week.

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