S&P Announces Ratings for Cat Bonds: Kilimanjaro Re Ltd. and Sanders Re. Ltd.

April 27, 2014

On Thursday, Standard & Poor’s Ratings Services announced ratings for catastrophe bonds sponsored by Everest Re and Allstate.


With respect to the Everest Re bonds, S&P assigned “BB-(sf)” ratings to the Series 2014-1 Class A and Class B notes issued by Kilimanjaro Re Ltd.

The initial franchise deductible amount for the Class B notes is $110 million. Loss amounts are based on insured industry losses as determined by Property Claims Services and the related territory payout figure. S&P said the ratings are based on the lowest of the natural catastrophe risk factor (“BB-“) for each class of notes, the rating on the assets in the reinsurance accounts (“AAAm”), and the rating on Everest Reinsurance Co., the ceding insurer. S&P said it will include the reinsurance protection provided under the catastrophe bond in the annual aggregate net probable maximum loss (PML) used for Everest Re’s capital adequacy analysis. Because the catastrophe bond’s trigger is based on industry losses, S&P will consider the basis risk between Everest losses and industry losses in the net PML.

Sanders Re

With respect to the Allstate issuance, S&P assigned “BB+(sf)” preliminary rating to the Series 2014-1 Class A notes and Class B notes and a “BB(sf)” preliminary rating to the Series 2014-1 class C and Class D notes to be issued by Sanders Re Ltd. These notes cover losses in the covered area from named storms and earthquakes (including fire following) on a per-occurrence basis.

S&P noted that Sanders Re the Class A notes are currently not being marketed, although it is S&P understanding that they may be in the future. “Whether or not they are issued has no impact on our ratings on the Class B, C, and D notes,” S&P’s statement said. Here, S&P explained that its preliminary rating is based on the lower of the rating on the catastrophe risk (“BB+” for the Class A and Class B notes, “BB” for the Class C and Class D notes); the rating on the assets in the reinsurance trust account (‘AAAm’); and the risk of nonpayment by the ceding company, Allstate Insurance Co. and various affiliates. S&P’s announcement went on to explain assumptions related to the modeling of the probability of attachment for the catastrophe risk factor and assumptions related to reset features. Source: Standard & Poor’s Rating Services