Two cat bonds upsize by more than 50%
New cat bond issuances from Everest Re and Aspen Bermuda expanded by at least 50 percent over the course of marketing, as investor appetite remained strong.
Aspen Bermuda's Kendall Re 2018-1 cat bond settled at $225mn, up 50 percent from an initial $150mn target. Everest Re’s two Kilimanjaro Re cat bonds settled at $525mn, up 75 percent on the original target size of $300mn.
Both series of the Kilimanjaro Re notes provide Everest Re with annual aggregate industry loss protection against US storm and earthquake risks. Each deal is split into one high-risk class A layer and a less risky class B layer.
Each of the higher-risk class A tranches of the Kilimanjaro Re cat bonds settled at $62.5mn, with a spread of 1,250 basis points (bps). This is toward the lower end of its revised target range of 1,225-1,325 bps, and as much as 125 bps below its initial midpoint target.
Meanwhile, the series B layers of the 2018-1 and 2018-2 issuances settled at $200mn each, up from a combined target size of $250mn. The insurance spread for these notes settled at 465 bps, again towards the lower end of a revised pricing range of 450-500 bps.
The spread suggests that there has been only a limited response on pricing for renewing sponsors that did not take cat bond losses from hurricanes Harvey, Irma and Maria.
Everest Re’s new transactions will replace the $450mn Kilimanjaro Re 2014-1 cat bond, which is set to mature at the end of April this year.
Meanwhile, Aspen Bermuda's Kendall Re cat bond priced at 525 bps, at the lowest end of the reinsurer's revised forecasts.
The spread on this deal settled 9 percent below the midpoint of its initial target range of 550-600 bps, before the range was lowered to 525-550 bps.
The transaction will provide the insurer with annual aggregate county-weighted cover for US multi-peril risk as well as protection against European storm risk.
Aspen was last in the cat bond market in 2007 when it launched the Ajax Re earthquake cat bond, which was guaranteed by Lehman Brothers and defaulted in 2009 after the investment bank collapsed.
For Kendall Re, the US perils will be triggered based on PCS index numbers, while the European winter storm trigger uses Perils data.
The US thunderstorm, wildfire and winter storm element covers US states and the District of Columbia.
The cat bond will initially cover a selection of western European countries, including the UK, the Netherlands, France and Germany.