cyber insurance-linked securities

The occurrence of a major cyber catastrophe loss event, while likely to lock-up most of the insurance-linked securities (ILS) capacity already deployed in the sector today, can also provide an opportunity to investors, as it should support understanding and belief in risk models while providing a higher-yielding opportunity, broker Lockton Re has suggested.

Amid high demand for capacity in the primary and reinsurance markets, analysis by Solidum Partners suggests the cyber cat bond segment will continue to grow in importance in the future and that market dynamics “should ensure adequate risk compensation in the medium term”.

The arrival of the world’s first cloud outage catastrophe bond was viewed very positively, and provides investors with a new avenue into the cyber insurance-linked securities (ILS) space, according to Henning Ludolphs, Managing Director Retrocession and Capital Markets at Hannover Re.

Global reinsurance firm Hannover Re has successfully sponsored a $13.75 million Cumulus Re (Series 2024-1) parametric cloud outage catastrophe bond that was privately issued and placed using the firm’s Kaith Re Ltd. vehicle, with modelling of the cyber risks undertaken by Parametrix.

When the first full 144A cyber catastrophe bonds came to market at the end of last year, it was critically important for their success that sponsors provided more than one view of their risk and allowed investors to have a multi-model view, to increase comfort with the new peril, speakers at the SIFMA ILS conference […]

The nascent cyber catastrophe bond and insurance-linked securities (ILS) market must grow to support the need for cyber insurance coverage, as traditional reinsurance risk tolerances are reached and the capital markets provides the perfect alternative, speakers at our recent ILS NYC 2024 conference explained.

Commenting this morning alongside his firm’s results announcement, Beazley Chief Executive Officer (CEO) Adrian Cox said that a “deep pool of capital” is required to support growing demand for cyber insurance, while the company’s CUO Bob Quane noted that the capital markets are now stepping up in support.

CyberCube, a specialist modelling firm for cyber risks and exposures, has analysed the four 144A cyber catastrophe bonds that have been issued to date and found that there is diversification between them, which it says means these first deals provide a solid base for future innovation.

With $415 million in 144A cyber catastrophe bonds issued in the latter stages of 2023, broker Gallagher Re is expecting activity levels to continue, according to Gallagher Securities’ Head of Cyber ILS, Theo Norris.

The US cyber insurance industry loss index launched by PERILS AG and CyberAcuView has been used for both a 144A cyber catastrophe bond and a cyber industry-loss warranty (ILW) transaction, the companies have said.