Everest gets $200m of retro from new Kilimanjaro cat bond, at lowest pricing

Everest Re has has now settled for $200 million in multi-peril per-occurrence retrocessional reinsurance from its new Kilimanjaro II Re Ltd. (Series 2024-1) catastrophe bond, securing that coverage at reduced pricing as the spreads settled well-below guidance, Artemis has learned.

Everest returned to the cat bond market in early June with an initial target to secure $150 million or more in multi-peril per-occurrence retrocession from this Kilimanjaro II Re Ltd. Series 2024-1 cat bond issuance.

As we later reported, the size target was increased, with up to $225 million of retro being sought, while the price guidance was updated at lower ranges.

Now, we’ve learned from sources that Everest has successfully priced its latest catastrophe bond, securing $200 million in protection from the deal, but finalising the spreads at the lowest-end of the reduced price guidance ranges.

Which suggests a focus more on price than amount of coverage, perhaps, and once again this is a strong signal for how execution has improved in the cat bond market, particularly for industry loss cat bonds, after the recent period of spread widening.

So, with this new catastrophe bond, Everest Re has now secured $200 million in cover for certain losses from named storms and earthquakes that impact the United States, Puerto Rico, U.S. Virgin Islands, D.C., and Canada, on a regionally weighted industry-loss trigger and per-occurrence basis, over a four year term.

The Kilimanjaro II Re Ltd. Series 2024-1 Class A tranche of notes launched with a $50 million target, which was then lifted higher to secure up to $75 million of protection and this is where the Class A notes will now settle, we are told.

The Class A notes have an initial base expected loss of 1.67% and were initially offered to cat bond investors with price guidance in a range from 7.25% to 8.25%, which was later updated and lowered to a new range of 6.25% to 7.25%.

We’re now told the $75 million of Class A notes priced for a spread of 6.25% to be paid to investors, so the bottom of the reduced guidance and representing a roughly 19% drop in pricing from the mid-point of initial guidance.

The Kilimanjaro II Re Ltd. Series 2024-1 Class B tranche of notes launched targeting $100 million in cover for Everest, which was then increased to up to a $150 million target, but we’re now told this tranche has been finalised at $125 million in size.

The Class B notes are riskier, sitting lower down, with an initial base expected loss of 2.03% and were at first offered to cat bond investors with price guidance in a range from 8.25% to 9.25%, which also fell to a new range of 7.25% to 8.25%.

Now, we understand the $125 million of Class B notes have been priced at the low-end as well, for a spread of 7.25% to be paid to investors and representing a roughly 17% drop in price from the initial mid-point of guidance.

Which are significant price declines. But then this cat bond was first launched to investors at a time of some uncertainty, due to the spread widening that was being seen to particularly affect industry-loss trigger catastrophe bonds.

The execution on this deal signals a complete reversal from those market conditions, to conditions far more conducive to efficient pricing, all stimulated by the wave of cash that was released by a glut of maturities in recent weeks, as we’ve explained before.

You can read all about this Kilimanjaro II Re Ltd. (Series 2024-1) catastrophe bond from Everest Re and every cat bond transaction ever issued in the extensive Artemis Deal Directory.