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Industry Updates
Cyber Evolution

The industry breaks new ground by planting cyberrisk in the capital markets.
  • Meg Green
  • February 2020
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Cyberrisks are finding a home in the capital markets in the form of collateralized reinsurance.

Last month, Beazley and RenaissanceRe said they've launched a new product that provides Beazley with additional catastrophe cover for cyber events, provided by capital structured by RenaissanceRe. “I'm aware of four companies that have done ILS transactions in cyber,” Tom Johansmeyer, head of PCS, said.

“This placing of cyber catastrophe risk into the capital markets opens up a new, larger source of capital to support Beazley's rapidly growing affirmative cyber offering in excess of levels currently available in the traditional reinsurance market,” the companies said in a statement.

Also the week of Jan. 6, AkinovA, the electronic marketplace for the transfer and trading of reinsurance risk, completed what it referred to as a first-of-its-kind parametric cyberrisk transfer on Dec. 23, 2019, the company said in a statement. Hiscox developed, structured, and provided capital for the transaction with broker Guy Carpenter. It's a quarterly cyber parametric instrument, the companies said. PCS, a Verisk business, is the reporting agent. The transaction was carried out electronically with full regulatory oversight from the Bermuda Monetary Authority, the marketplace said. AkinovA has an insurance regulatory sandbox license that was issued by the BMA in May 2019.

Hudson Structured Capital Management has also underwritten cyberrisk transactions with collateralized reinsurance, in addition to other market participants who haven't been publicly named, Johansmeyer said. Property catastrophe coverage continues to represent the bulk of reinsurance in insurance-linked securities. While collateralized reinsurance isn't considered a traditional 144A cat bond—typically viewed as a more liquid instrument that can be traded in the secondary market—these collateralized cyber transactions are similar to a “private” cat bond, and a step in the right direction, Johansmeyer said.

—Meg Green

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