Everest has $350m of cat bond cover for hurricane Ian industry loss creep

Global insurance and reinsurance specialist Everest Group has $350 million of industry loss based retrocessional protection available to it from its catastrophe bonds to cover losses related to hurricane Ian, should the current industry loss estimate creep higher.

In reporting its second-quarter results back at the end of July, Everest revealed that its Kilimanjaro Re catastrophe bond deals were set to respond to the rising level of insurance industry losses from the impacts of 2022’s hurricane Ian, which were largely in Florida.

Everest has been sponsoring catastrophe bonds under the Kilimanjaro Re Limited program since 2014 and at the time hurricane Ian struck, the re/insurer had $1.8 billion of risk capital still outstanding under the cat bonds that are still in-force.

That remains the situation today, with Everest featuring at sixth position in Artemis’ catastrophe bond sponsor leaderboard.

In reporting its Q2 and first-half results, Everest said that its catastrophe losses in the quarter were “partially offset by $30 million of catastrophe bond recoveries related to Hurricane Ian.”

In a filing, Everest said that, as of June 30th, the company has $350 million of catastrophe bond protection available to it for recoveries, in case the industry loss from hurricane Ian rises.

That $350 million of Kilimanjaro Re cat bond protection attached at a PCS reported industry loss of $48.1 billion for hurricane Ian.

Everest said that, as of July 2023, the PCS reported industry loss estimate for the hurricane had reached $49.4 billion, so attaching the Kilimanjaro Re cat bond coverage for the re/insurer.

The company then explained that the $350 million of Kilimanjaro Re cat bond protection would pay out on a pro-rata basis, as the PCS industry loss estimate rose higher.

This $350 million of coverage would pay out in full should the PCS industry loss estimate reach $63.8 billion, Everest said.

Given where the PCS loss estimate for hurricane Ian sits at the moment and how far the sliding pay-out from the cat bond cover can run, it seems very unlikely Everest would get to recover the full $350 million from this important retrocessional protection.

But it does mean the company is well-protected, should hurricane Ian’s ultimate industry loss end up creeping higher over time.