Specialty insurer Beazley has launched the first cyber catastrophe bond in the global insurance market.
The $45 million bond indemnifies Beazley for all perils above a $300 million catastrophe, with the possibility of additional tranches being released through 2023 and beyond.
This is the first time a liquid Insurance-Linked Securities (ILS) instrument has been created for cyber catastrophe risk, Beazley said.
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 distant catastrophic and systemic events, Beazley said, explaining that developing effective disaster risk solutions is vital to increasing the supply of capacity in the cyber reinsurance market, to meet growing demand to coverage from business and society.
“I am proud that the high quality of Beazley’s cyber insurance has been recognized by investors with the placement of the first cyber catastrophe bond on the market. As a leader in this market, we are at the forefront of delivering new solutions that enable the cyber insurance market to grow to the size customers need,” said Adrian Cox, CEO of Beazley.
“A key element of this facility is the flexibility to scale over time and support our continued, sustainable growth in cyber. I would like to thank the investors and our brokers for their support in reaching this important milestone for the cyber market,” he added.
“As an ILS investor, we have been monitoring the cyber insurance market for several years awaiting the right investment opportunity,” said John Seo, co-founder and general manager of Fermat Capital Management.
“This well-structured relationship together with Beazley’s strong cyber insurance has given us the basis for this. We believe this deal is an important step in unlocking capital market investment in cyber risk and provides a solid foundation for a future cyber ILS market,” said Seo.
“Helping to bring new and alternative capacity into the global cyber reinsurance market to keep pace with the rapidly increasing demand for risk transfer has been a primary focus of the Gallagher Re cyber team,” said Tom Wakefield, CEO of Gallagher Re in the statement. UK.
“Beazley’s cyber expertise and proactive involvement in capital markets have proven to be an instrumental partner in placing this first cyber catastrophe bond on their behalf,” said Wakefield. “The caliber of the ILS investors involved and the complexity of the class required a high quality insurance business to ensure a successful outcome. Where carriers can demonstrate a similar approach, there is an opportunity for a strong and sustainable cyber catastrophe ILS market.”
Catastrophe trends Cyber market New markets