Lockton Re executes ILW covering property cat and cyber risks in a single limit

Reinsurance broker Lockton Re has successfully executed what the firm believes is the first industry-loss warranty (ILW) that combines property catastrophe and cyber risk triggers within a single limit structure for a protection buying client.

The innovative structure utilises a trigger from PERILS AG, working with with CyberAcuView as the index provider for cyber risk, while Verisk’s PCS provided the industry index for the covered property catastrophe exposure.

Lockton Re explained that this demonstrates how the industry-loss warranty (ILW) market can continued to evolve beyond traditional property-only use-cases, while further underscoring the increasing maturity of the cyber ILW and industry-loss index trigger sector.

Lockton Re designed the ILW placement to solve the inherent needs of global cedents that are looking for efficient ways to derisk, including their growing US cyber exposures.

Multi-peril coverage within a single limit utilising industry-loss triggers has become increasingly prevalent in the catastrophe bond market in recent years, now the ILW market is moving in a similar direction, but bringing catastrophe and specialty lines together in single hedging transactions such as this.

Tom Parcell, Chief Broking Officer, Lockton Re, Bermuda commented, “This deal reflects Lockton Re’s focus on innovation that supports our clients and builds on the breadth of products that can be traded in the market. As the ILW market continues to evolve, we are seeing broader demand from clients for risk solutions that look at new structures and integrated options, and we are particularly excited about the opportunity for growth in this space with more bespoke, alternative index covers for our clients.”

Theo Norris, International ILS and Cyber ILS Leader, Lockton Re Capital Markets, further stated, “This deal highlights trends we are seeing with the convergence of property catastrophe and cyber risk transfer, the growing maturity of industry cyber loss indices, and the development of new capital solutions for the market.

“Lockton Re Capital Markets is going one step further, establishing Catastrophe Bonds with Property and other lines of business, including cyber, across multiple tranches. The way Lockton Re is structured and our lack of internal silos means we can quickly adapt, understand, and work in teams built around clients to maximise new opportunities.”

Lockton Re said it expects to see further developments in hybrid ILW structures, designed to solve client needs.

While, as the cyber industry loss reporting space continues to advance, the reinsurance broker expects we will also see more hybrid collateralised reinsurance and catastrophe bond structures.

Lockton Re did not specify the type of markets that supplied capital to support this dual-peril, single limit ILW arrangement, but these instruments will be appealing to insurance-linked securities funds and ILS investment managers.