Swiss Re Insurance-Linked Fund Management

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Fermat uses CyberCube tech to understand cyber accumulation risks


Specialist insurance-linked securities (ILS) investment manager Fermat Capital Management, said today that it has licensed CyberCube’s Portfolio Manager technology to help it gain a better understanding of cyber accumulation risks.

fermat-capital-cybercubeJoanna Syroka, Senior Underwriter and Director of New Markets for Fermat explained that, “Cyber is primed to become a peak peril for (re)insurers, creating a strategic opportunity for ILS to reduce stress on (re)insurance balance sheets.”

Because of this, it’s expected insurance-linked securities (ILS) capital will eventually support an increasing amount of cyber insurance and reinsurance risk, making it critical that ILS fund managers, like Fermat, have the tools and software to support an expansion into the still nascent cyber ILS space.

Syroka went on to say that, “Developing a consensus view on cyber accumulation risk via a market-leading risk model will be a critical component of a future, scalable ILS cyber market for investors.”

Fermat Capital Management’s adoption of CyberCube’s Portfolio Manager tool is the first time that an entity that isn’t a traditional carrier or intermediary of insurance or reinsurance has partnered with the cyber risk specialist.

Portfolio Manager is a software-as-a-service application that provides uses a streamlined approach to financially stress test portfolios of risks against a range of cyber-related scenarios, such as ransomware attacks and cloud outages.

CyberCube said that, “Fermat‘s use of the product signals the growing relevance of cyber risk to businesses and markets beyond insurance.”

Sean Omar, Sales Manager for CyberCube, commented, “This partnership with Fermat breaks new ground for CyberCube. It demonstrates the growing relevance of cyber risk and an increasing focus on cyber risk accumulation.

“Understanding and quantifying these cyber exposures will be a prerequisite to tapping the ILS and capital markets for cyber risks. Fermat is a market leader in the ILS field and clearly grasps the increasing significance of cyber risks and the potential for growth in the ILS asset class.”

Syroka also said, “We’ve been extremely impressed with CyberCube’s offering and the deep cyber risk insights that its products generate.

“We look forward to using Portfolio Manager to better understand cyber accumulation risks and are excited to partner with CyberCube as the cyber ILS market develops.”

With a growing need for cyber reinsurance and also retrocession, the insurance-linked securities (ILS) market is a likely source of interest, for at least well-structured and documented areas of cyber exposure.

In order to build their appetites for cyber risk, ILS fund managers, such as Fermat, need to be able to analyse portfolios of risk and understand the potential exposure they could be assuming by deploying capital to them.

It’s encouraging to see ILS managers embracing cyber analytic and modelling tools, as it suggests the development of a cyber ILS market is already underway.

Fermat Capital Management ended 2021 with $8.3 billion of catastrophe bond and ILS assets under management, making it the second-largest ILS investment manager in our Directory.

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