Lloyd’s specialist insurance and reinsurance player Beazley and Bermudian reinsurance firm and third-party capital manager RenaissanceRe have collaborated on an innovative capital markets backed cyber catastrophe reinsurance arrangement.
The transaction sees Beazley set to benefit from capital markets backed cyber reinsurance, in a transaction arranged and structured by RenaissanceRe on behalf of some of its third-party capital investors.
The new reinsurance product will provide Beazley with additional reinsurance coverage for cyber catastrophe events, with the majority of the capacity sourced from the capital markets and structured by RenRe.
The two companies hailed the deal, saying that, “This placing of cyber catastrophe risk into the capital markets opens up a new, larger source of capital to support Beazley’s rapidly growing affirmative cyber offering in excess of levels currently available in the traditional reinsurance market.”
Details of the transaction itself are scant, but it’s likely to be either an indemnity cover or one linked to major cyber catastrophe loss event reports (potentially industry or parametric in nature).
The pair said the deal is one of the first cyber catastrophe insurance solutions backed by the capital markets, brough to market by the combined efforts of RenRe’s capabilities in matching risk to alternative sources of reinsurance capital for innovative solutions and Beazley’s cyber expertise and claims data.
This capital markets backed cyber risk reinsurance deal seems like a one-off so far, but such a facility could become an important source of efficient reinsurance capital to support Beazley’s growing cyber insurance underwriting book.
Perhaps in the future a facility such as this could become more akin to a cyber sidecar vehicle, allowing Beazley to access insurance-linked securities (ILS) capacity to support and augment its cyber risk underwriting, to better manage the potential volatility associated with cyber catastrophe events.
Adrian Cox, Beazley chief underwriting officer, commented on the deal, “As the scale of the cyber threat to businesses continues to intensify, the challenge to the insurance industry is to ensure we continue to provide cover that responds as the risk evolves and capacity that is commensurate to the size of the risk. We are delighted to partner with RenaissanceRe to deliver valued cyber cover to our growing client base whilst managing accumulations of risk within the group’s tolerances.”
David Marra, RenaissanceRe’s chief underwriting officer – casualty & specialty, added, “We are pleased to partner with Beazley to provide a solution to businesses seeking higher levels of cyber insurance cover. Our ability to address the emerging challenges of the market by structuring attractive opportunities for investors is a hallmark of RenaissanceRe’s creative approach to risk selection, capital management and client service.”