Specialist insurer Beazley has launched the global insurance market’s first cyber catastrophe bond.
The $45 million bond gives Beazley indemnity against all perils in excess of a $300 million catastrophe event, with the potential for additional tranches to be released through 2023 and beyond.
This is the first time that a liquid insurance-linked securities (ILS) instrument has been created for cyber catastrophe risks, said Beazley.
The bond is backed by a panel of ILS investors including Fermat Capital Management LLC and was structured and placed by Gallagher Securities, the ILS arm of Gallagher Re.
The bond is designed to cover remote probability catastrophic and systemic events, Beazley said, explaining that the development of effective solutions for catastrophe risk is vital to allow the supply of capacity to the cyber re/insurance market to increase, to meet growing demand for cover from business and society.
“I’m proud that the high quality of Beazley’s cyber underwriting has been recognized by investors in the placement of the market’s first cyber catastrophe bond. As a leader in this market, we are at the forefront of delivering new solutions that are allowing the cyber insurance market to grow to the size that clients need,” commented Adrian Cox, CEO of Beazley.
“A key element of this facility is its flexibility to scale over time and support our continued, sustainable growth in cyber. I’d like to thank the investors and our brokers for their support in achieving this important milestone for the cyber market,” he added.
“As an ILS investor, we have been monitoring the cyber insurance market for several years, waiting for the appropriate opportunity to invest,” according to John Seo, co-founder and managing director at Fermat Capital Management.
“This well-structured bond together with Beazley’s strong cyber underwriting have provided the basis for us to do so. We believe this deal marks an important step in unlocking capital market investment into cyber risk and creates a solid foundation for a future cyber ILS market,” Seo said.
“Helping to bring new and alternative capacity into the global cyber re/insurance market to keep pace with rapidly rising demand for risk transfer has been a primary focus of the Gallagher Re cyber team,” according to Tom Wakefield, UK CEO, Gallagher Re.
“Beazley’s cyber expertise and proactive engagement with capital markets has proven them to be an instrumental partner in placing this first cyber catastrophe bond on their behalf,” Wakefield said. “The caliber of ILS investors involved, and complexity of the class, demanded an underwriting business of high quality to ensure a successful outcome. Where carriers can demonstrate a similar approach, the opportunity exists for a strong and sustainable cyber catastrophe ILS market.”