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Beazley tops-up cyber cat bond cover with second $20m issuance


Beazley, the London headquartered specialty insurance and reinsurance underwriter, has successfully sponsored its second cyber catastrophe bond, Artemis has learned from sources, with the firm topping up its debut cyber cat bond using a second segregated cell to add $20 million of fresh reinsurance cover, through a Cairney II issuance.

beazley-cyber-cat-bondBack in January, Beazley became the first sponsor of a cyber cat bond, when it announced the successful placement of a $45 million private Section 4(2) cyber catastrophe bond.

That first Beazley cyber cat bond provided the re/insurer with broad cyber reinsurance cover for remote probability catastrophic and systemic events, including tech errors & omissions (E&O) risks, across a roughly one-year term.

The first Beazley cyber cat bond was a $45 million privately placed Section 4(2) issuance, and the special purpose insurer (SPI) used was the Artex Risk Solutions owned and operated segregated account reinsurance transformer platform named Artex SAC Limited, acting on behalf of a segregated account, or cell, named Cairney.

Which means these deals are more 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.

In fact, we’re told the reinsurance layer in question had previously been transferred as collateralised reinsurance, prior to the first cat bond being issued.

Now though, Artemis has learned that Beazley has sponsored another $20 million Section 4(2) cyber cat bond issuance, using a segregated account named Cairney II, of the same Artex SAC vehicle.

This Cairney II $20 million of cyber cat bond notes appears to be an extension of the first Beazley deal.

We’re told the reinsurance coverage is for the same type of cyber risks and that the notes will run to the same maturity of the first issuance, which is to the end of this year.

Beazley had previously said it would seek to expand on its first cyber cat bond, so it’s not surprising to learn of this second Cairney II issuance.

With both Cairney cyber cat bonds now providing Beazley with $65 million of cyber reinsurance running to the end of 2023, with the notes having a due date of January 8th 2024 (the same as the first Cairney cyber cat bond), it will be interesting to see whether the re/insurer looks to bring its first 144A cyber cat bond issue around that time, to replace them.

The first Beazley cyber cat bond issuance saw Gallagher Securities acting as the sole structuring agent & bookrunner, while CyberCube provided the risk modelling. At this stage we do not know if the same is true for this Cairney II cyber cat bond, although there’s a strong chance it is the case.

Given Beazley’s continued growth into cyber insurance underwriting, its need for cyber reinsurance will keep growing and the capital markets can play an important role in that, through these private cat bonds and an anticipated future 144A deal.

Accessing the insurance-linked securities (ILS) market again for its second cyber cat bond demonstrates the maturity of Beazley’s cyber underwriting business, its growth, as well as the acceptance and understanding cat bond investors have for its strategic use of risk capital to support that operation.

You can read all about this Beazley cyber cat bond (Cairney II) in our extensive catastrophe bond Deal Directory.

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