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Beazley cyber cat bond (Cairney)

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Beazley cyber cat bond (Cairney) – At a glance:

  • Issuer: Artex SAC Limited
  • Cedent / sponsor: Beazley
  • Placement / structuring agent/s: Gallagher Securities is sole structuring agent & bookrunner
  • Risk modelling / calculation agents etc: CyberCube model
  • Risks / perils covered: Cyber risks
  • Size: $45m
  • Trigger type: Indemnity
  • Ratings: NR
  • Date of issue: Jan 2023

Beazley cyber cat bond (Cairney) – Full details:

Beazley, the London headquartered insurance and reinsurance company, has sponsored a $45 million Section 4(2) private catastrophe bond, dubbed “Cairney” after the segregated account used, that provides the company with capital market investor-backed cyber reinsurance protection.

It’s also notable as this is the first time Beazley has been listed in our catastrophe bond Deal Directory, as the company has never sponsored a cat bond deal before.

While this first cyber cat bond is a private Section 4(2) cat bond, it is fully tradeable under Rule 144A.

With this being termed a cyber catastrophe bond, we assume that underpinning it is an excess-of-loss reinsurance or retrocession arrangement and it covers what is considered relatively remote cyber risk for Beazley.

The $45 million private Section 4(2) catastrophe provides Beazley with one year of indemnity reinsurance protection against all perils in excess of a $300 million cyber catastrophe event, the attachment point for the cyber cat bond notes.

As a result, it appears to be an indemnity cat bond, that will provide Beazley with reinsurance protection on a per-occurrence basis.

The company said that the structure gives the potential for additional tranches to be released through 2023 and beyond.

The cyber cat bond has been backed by a panel of ILS investors including Fermat Capital Management, LLC, Beazley explained, while it was structured and placed by Gallagher Securities, the ILS arm of Gallagher Re.

Beazley said that the cyber cat bond will provide it with reinsurance cover for remote probability catastrophic and systemic events.

The cyber cat bond provides Beazley with cover for broad cyber and also tech errors & omissions (E&O) catastrophe risks on an indemnity trigger basis.

Being a privately placed Section 4(2) cat bond, this Cairney deal is akin to a transformed collateralised reinsurance deal that has been syndicated across a group of investors and securitized using a segregated cell of a special purpose insurance vehicle.

The special purpose insurer (SPI) used for this transaction was the Artex Risk Solutions owned and operated segregated account reinsurance transformer platform named Artex SAC Limited.

The almost $45.06 million of notes were issued using Artex SAC Limited’s ILS Note Program II, on behalf of a segregated account named Cairney. The notes were listed on the Bermuda Stock Exchange and are due January 8th 2024.

We’ve also learned that the risk model used for this cyber cat bond was one from specialist firm CyberCube.

Global law firm Mayer Brown was the transaction counsel for this first cyber cat bond.

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