Beazley launches first cyber cat bond
Beazley, the specialist insurer, has launched what has been described as the market’s first cyber catastrophe bond. The bond is designed to cover remote probability catastrophic and systemic events.
The $45 million private Section 4(2) bond is fully tradeable under Rule 144A resale and 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. The bond is backed by a panel of ILS investors including Fermat Capital Management and was structured and placed by Gallagher Securities, the ILS arm of Gallagher Re.
Beazley says this is the first time that a liquid Insurance-Linked Securities (ILS) instrument has been created for cyber catastrophe risks. Private placements transferring cyber risk into the ILS markets have been done before but they may not have been tradeable.
Adrian Cox, CEO Beazley, said: “I’m proud that the high-quality of Beazley’s cyber underwriting has been recognised 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. 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.”
John Seo, co-founder and managing director at Fermat Capital Management, added: “As an ILS investor, we have been monitoring the cyber insurance market for several years waiting for the appropriate opportunity to invest. 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.”
Tom Wakefield, UK CEO, Gallagher Re, commented: “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. 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. The calibre 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.”
