Ariel Re, the Bermuda headquartered global reinsurance firm, remains constructive on the outlook for the cyber insurance-linked securities (ILS) market, with Dan Carr, Head of Cyber at the firm, emphasising that as cyber portfolios continue to grow as the risk further escalates, this will allow alternative capital to become a more important part of the cyber exposure landscape.
The cyber ILS market has grown in capacity and confidence since the first cyber catastrophe bond was issued in 2023, however issuance activity has subdued amid strong competition from traditional reinsurers, and growing demand for nat cat ILS.
Artemis’ data shows that cyber catastrophe bonds currently account for 1.3% of the outstanding catastrophe bond and ILS market.
However, while traditional reinsurance capacity is keeping the cyber ILS market limited for now, underlying risk modeling and investor confidence within the asset class continues to grow and gain momentum.
Speaking to Artemis around the 2026 Monte Carlo Rendez-Vous de Septembre (RVS) reinsurance industry event, Carr discussed what Ariel Re’s outlook is for the cyber ILS market, as well as how the cyber space continues to be supported by a broad range of vehicles and structures.
“We remain constructive on the outlook for alternative capital in cyber. As cyber portfolios grow and the risk becomes increasingly characterised by accumulation, common dependencies and potentially systemic loss, we think alternative capital will become a more important part of the overall capacity landscape,” Carr explained to Artemis.
“That will include standalone cyber bonds, but we would expect the opportunity to be broader than that. Cyber is increasingly being supported through a range of vehicles and structures that either write cyber directly or provide capital to portfolios with meaningful cyber exposure.”
He continued: “We are very familiar with transforming risk and utilising alternative capital, so we see this as a natural extension of how the market can finance catastrophe and systemic cyber risk.”
In addition, Carr also observed that the market is seeing cyber included more frequently within multi-peril catastrophe structures, which ultimately helps to provide a diversifying source of risk alongside natural catastrophe.
“That can broaden the investor base and create additional routes for capital to access cyber without requiring every investor to take a standalone view on the class,” Carr told Artemis.
Carr also acknowledges how cyber remains a highly specialist and dynamic risk, given that its underlying exposure can change so frequently.
“The underlying exposure, threat environment and technology dependencies can change quickly, and apparently diversified portfolios can still share common points of failure. As alternative capital becomes more involved, there will therefore continue to be a need for genuine transparency, collaboration, cyber underwriting, aggregation and reinsurance expertise to understand, structure and manage that exposure effectively,” Carr said.
Concluding: “That is an important part of the market opportunity. Alternative capital is already a familiar part of the catastrophe market, and we expect it to become a growing and increasingly important part of the cyber exposure landscape.
“We do not see specialist reinsurance expertise being disintermediated by that growth; if anything, the ability to assess, structure and transform a complex and evolving risk becomes more important as the sources of capital broaden.”
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