If fortune favors the brave, trepidation in the insurance-linked securities market may be dampening investor profits.
Recent outlier losses in the property-catastrophe market have left ILS investors reeling, and trapped collateral may be clouding the better judgment of those who bear the catastrophe risk. It also has unfairly delayed cyber-ILS adoption, as investors perceive failures within the property ILS market as rationale for missing the opportunity in cyber—worse yet, failing to recognize the caliber of cyber risk as a quantifiable and insurable peril.Executive Summary Opinion: Cowbell Cyber’s Dan Palardy and Envelop Risk’s Anjali Dharma-Wardana’s argue that ILS investors are being too timid when it comes to cyber risk. Here, they compare cyber and natural catastrophe risks, suggesting a shift in focus from the interconnected potential for loss in the cyber world to the interconnected potential for loss mitigation and prevention—a potential they believe translates directly to a more insurable type of catastrophe risk.