Everest Re says no covered events attach to Kilimanjaro Re cat bonds yet

Despite continued uncertainty over the potential for catastrophe events to cause losses to a number of its catastrophe bonds, Everest Re says that as of the end of 2022, no covered events had attached to drive any recoveries under its in-force Kilimanjaro Re catastrophe bonds.

Insurance and reinsurance firm Everest Re has over $2 billion of catastrophe bonds still in-force from its Kilimanjaro Re series of cat bond deals.

Which puts the company second in our leaderboard of catastrophe bond sponsors by risk capital still outstanding.

The $2.063 billion of catastrophe bond coverage is provided across 13 tranches of notes, from the Kilimanjaro Re series of cat bond deals.

Everest Re, being a global player in insurance and reinsurance and having significant catastrophe exposure in the United States, saw many of its Kilimanjaro Re cat bonds marked down in secondary markets over recent years.

Events that have caused the marking down of Kilimanjaro Re cat bonds come from 2018 loss years onwards and it is the per-occurrence layers of retrocessional reinsurance protection that are currently marked down the most, while the aggregate tranches have ben recovering steadily (although still being marked down by up to 15% depending on the layer.

But some of the per-occurrence tranches of notes, from the Kilimanjaro Re series of issues are marked down as much as 50%, depending on which broker pricing sheet you consult, showing that the market continues to consider these at some risk of potential losses.

So far though, none of the Kilimanjaro Re cat bonds has actually attached and no recoveries are due to Everest Re as a result.

The cat bonds are all industry loss trigger based, using PCS data in each case.

“Currently, none of the published insured loss estimates for catastrophe events during the applicable covered periods of the various agreements have exceeded the single event retentions or aggregate retentions under the terms of the agreements that would result in a recovery,” Everest Re said, as of the end of 2022.

The notes marked down the most are from the older per-occurrence cat bonds, issued in 2019, but they remain on-risk until late 2023 and 2024.

So there is still time for further development and the market continues to watch them closely, which is why they remain marked down on secondary pricing sheets.

But, as the catastrophe events that could potentially affect those tranches of notes also move further into history, the industry loss estimates associated with them tend to settle and the chances of significant upward movement reduces.

As a result, cat bond fund managers and investors holding the marked-down Kilimanjaro Re notes will be pleased to hear no event has yet attached any of the tranches, but will continue to be cautious with the bonds until loss estimates eventually settle.