Everest lifts retro target to $225m for new Kilimanjaro cat bond, as pricing falls

Signals that catastrophe bond market pricing has stabilised continue, as Everest Re has lifted the target size and lowered the pricing for its new catastrophe bond, with now up to $225 million in multi-peril per-occurrence retrocession sought from the Kilimanjaro II Re Ltd. (Series 2024-1) issuance, Artemis has learned.

In recent weeks timing has been everything for catastrophe bond sponsors, with some facing challenging conditions and rising prices for a time, resulting in the pulling of two issues, but since then and just a few weeks later, we’re increasingly seeing issuance prices fall while cat bond books are building.

Cat bond market conditions have changed rapidly since March, almost hardening and making the cost of issuance higher for a time, then rapidly returning to a more stable state with most of the most recent catastrophe bond transactions pricing down.

Which is what Everest Re, the global reinsurance arm of Everest Group, is experiencing, as its new Kilimanjaro Re cat bond looks set to upsize and price down, possibly below the initial guidance, we are told.

Everest came to market in early June seeking $150 million or more in multi-peril per-occurrence retrocession from this Kilimanjaro II Re Ltd. Series 2024-1 cat bond issuance.

With this new catastrophe bond, Everest Re seeks 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.

We’re now told by sources that the original $150 million target has been lifted, with Everest now seeking up to $225 million of retrocession from this deal.

At the same time as looking set to upsize, we’re told Everest is now targeting below-guidance pricing for both of the tranches of cat bond notes on offer.

The Kilimanjaro II Re Ltd. Series 2024-1 Class A tranche of notes launched with a $50 million target, which we’re now told is aimed higher to secure up to $75 million of protection.

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%, but we’re now told that guidance has been lowered to a new range of 6.25% to 7.25%.

The Kilimanjaro II Re Ltd. Series 2024-1 Class B tranche of notes launched targeting $100 million in cover for Everest, which we’re now told has increased to up to $150 million.

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%, but we’re now told this guidance has also fallen to a new range of 7.25% to 8.25%.

So a full percentage point drop in the range of spread pricing offered, while the target size has increased by 50% as well, definitely signalling much-improved cat bond issuance conditions for sponsors.

No doubt the glut of maturities that we said to expect cash from have helped in stabilising the marketplace, once again showing how sensitive the balance of the catastrophe bond market can be and that it does not take that much liquidity contraction, or increase, to move the market quite significantly.

A further reflection of improved cat bond market issuance conditions is that we’re now told this deal is expected to settle more than a week earlier than the initial target, which will now put this cat bond into the June and first-half figures.

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.