Cyber catastrophe bond news

The US cyber insurance industry loss from the recent CrowdStrike related IT outage is expected to come in below $1 billion, according to specialist insurer Coalition, with the company saying its modelling suggests a lower bound of $270 million or even lower, while the upper-bound is $960 million.

The recent global IT systems outage caused by the CrowdStrike event can serve to build more confidence in cyber catastrophe bonds, as some of the biggest questions posed about this new segment of insurance-linked securities (ILS) were about how losses from a major cyber event would manifest, Jonathan Hatzor, CEO of Parametrix told us.

CyberCube, a specialist modelling firm for cyber risks and exposures, has estimated that insurance industry losses from the CrowdStrike linked global IT outage for the standalone cyber insurance market will be between $400 million and $1.5 billion.

Parametrix, a specialist in parametric cloud downtime cyber insurance and reinsurance protection, has issued an estimate for the insurance industry loss caused by the CrowdStrike linked global IT outage, saying it anticipates insured losses falling in a range of $540 million to $1.08 billion.

Analysts at Berenberg have said today that because of the nature of specialty re/insurer Beazley’s cyber book of business, they do not feel its losses from the CrowdStrike linked IT outage will be significant and expect them to come in well below where the PoleStar Re cyber catastrophe bonds attach.

Reflecting the seriousness of the CrowdStrike related global IT outage, leading cyber insurer Beazley has provided an update to the market saying that it does not expect any change to its combined ratio guidance after this event.

The CrowdStrike IT outage incident shows the need for a more granular understanding of coverage under cyber reinsurance portfolios and catastrophe bonds, but also demonstrates the importance of continued development of these instruments, as they provide critical coverage to the cyber insurance market.

Cyber catastrophe bonds have come into focus after a global IT outage caused by a CrowdStrike service update resulted in millions of computers running critical services going offline, raising questions surrounding cyber loss accumulation and aggregation risks, and highlighting some uncertainties over exactly what cyber cat bonds cover.

While cyber insurance pricing seems to have levelled off in 2023, rating agency AM Best noted that more can be done to attract capital to the segment, including through the provision of greater clarity on cyber risks that are considered systemic.

There is “considerable” room for growth in the cyber catastrophe bond market, as cyber insurers and reinsurers get increasingly comfortable with event-based excess-of-loss coverage options and use of quota shares in the cyber reinsurance space reduces, broking group Howden has said.