Swiss Re brings first cyber industry-loss cat bond under Matterhorn Re

Global reinsurance giant Swiss Re is bringing the first industry-loss triggered cyber catastrophe bond to market, seeking $50 million of retrocession against systemic cyber loss events through a Matterhorn Re Ltd. (Series 2023-1) transaction.

This takes the number of 144A cyber catastrophe bonds to hit the market in recent months to four, as this nascent sector of insurance-linked securities (ILS) continues to expand.

Using its Bermuda based Matterhorn Re Ltd. vehicle, Swiss Re is targeting $50 million of industry-loss based retro risk transfer with this first cyber cat bond from the company.

Matterhorn Re will issue a $50 million or larger tranche of Series 2023-1 notes, which we’re told are denoted as Class CYB-A notes.

Those notes will be sold to investors and the proceeds used to fund a retrocession agreement between the issuing vehicle and Swiss Re. The retrocession will run from the date of completion of this issuance, to the end of 2026 we’re told, so a two year or slightly over run.

The notes will be exposed to cyber industry insured losses from the United States, on a per-occurrence basis, as reported by PERILS AG, we understand.

We’re also told that the notes would attach at a US cyber industry loss of $9 billion or greater.

The currently $50 million of Matterhorn Re 2023-1 Class CYB-A cyber cat bond notes come with an initial attachment probability of 2.228%, an initial expected loss of 1.721% and are being offered to investors with price guidance in a range from 10% to 11%, we understand.

It’s encouraging to see an industry-loss trigger being used for a cyber cat bond issuance, as it adds another test for the cat bond investor base’s appetite for cyber risk and will deliver important experience to the market and deal facilitators along the way.

It’s also interesting to see industry-loss coverage tailored to the United States, showing how cyber industry-loss cat bonds could provide regional retrocession, in an efficient manner from the capital markets.

But, explaining this regional approach, the PERILS cyber industry loss index includes US insured losses only, so a broader global cyber retro deal is not possible with that index provider currently.

You can read all about this new cyber catastrophe bond from Swiss Re, the Matterhorn Re Ltd. (Series 2023-1) transaction, and every other cat bond ever issued in the Artemis Deal Directory.