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Hudson Structured & Aon team up for $70m cyber catastrophe product


Hudson Structured Capital Management Ltd., which enters into insurance and reinsurance investment business as HSCM Bermuda, has teamed up with broking powerhouse Aon for a new cyber catastrophe coverage product, that can cover systemic cyber risks for insurance and reinsurance ceding companies.

cyber-securitisation-ilsThe pair have already entered into their first deal, a retrocession contract on behalf of an undisclosed cedent.

The product will have up to $70 million of capacity behind it, led by Hudson Structured and Aon sees this new product offering as relevant to protect insurers and reinsurers against systemic and catastrophic cyber events.

The global cyber insurance market is forecast to grow to US $20 billion by 2025, according to Aon and market analysis.

As traditional reinsurance cover for catastrophic cyber risks is currently challenged, Aon is looking to the capital markets for alternatives and ILS, reinsurance and transportation focused investment manager Hudson Structured is a natural choice to turn to, given the managers broad appetite for a range of insurance risks.

Aon sees the product as offering its clients a way to rethink their access to capital, taking stock of a new source of capacity and protection from the capital markets.

The product will have limits of up to US $70 million, and is designed to protect against increasing cyber loss aggregations on insurance or reinsurance balance sheets.

This capital markets backed cyber risk transfer product is structured to protect cedents against the effects of catastrophic cyber market losses that could result from events such as self-propagating malware or wiperware, distributed denial of service, a significant cloud outage or certificate revocation, Aon explained.

Luke Foord-Kelcey, International Head of Cyber at Aon’s Reinsurance Solutions, commented on the news, “In addition to increased claims activity in the cyber market, the current global crisis has emphasised the need for re/insurers to protect for systemic events. We are enabling carriers to navigate new forms of volatility by expanding the cyber reinsurance and retro markets to address this risk’s inherent systemic exposures.

“Our methodology allows us to develop event definitions that achieve clarity and confidence for all parties. Combined with the multi-model approach from Aon’s dedicated cyber analytics team, this has enabled us to develop a platform with HSCM that allows capital markets to participate in the fast-growing cyber sector in a manner that works for both cedents and investors and, importantly, that enables investors to fund limits previously unseen in this space.”

Using the term “event definitions” suggests there is perhaps an element of the parametric about this cyber cover, at least in terms of activation of the coverage only for specific events that meet certain qualifying metrics, or definitions.

Edouard von Herberstein, Partner & Chief Underwriting Officer – HSCM Bermuda, also said, “We are excited to help cedents transfer their cyber risk through this innovative and ILS-friendly structure with Aon. This is a great example of insurance and ILS markets offering risk transfer solutions for intangible assets, an area of the market where we expect to see a growing number of opportunities in the years to come.”

Hudson Structured Capital Management Ltd. recently also supported an innovative intellectual property assets created by Aon.

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