Chubb sponsoring its first 144A cyber cat bond, $100m East Lane Re VII

Artemis has learned that a third full 144A cyber catastrophe bond is now in the market and this latest issuance is being sponsored by international insurance giant Chubb, as the company returns to the cat bond market for the first time since 2015, seeking $100 million or more in cyber reinsurance protection from an East Lane Re VII Ltd. (Series 2024-1) transaction.

Not only is this notable as being the first Rule 144A cyber catastrophe bond transaction from Chubb, it is the third full cyber cat bond in a matter of weeks, following on the heels of AXIS Capital with the first to settle, Long Walk Re, and Beazley with its PoleStar Re cyber cat bond that is still being marketed.

It’s also notable that this is the eighth catastrophe bond named East Lane Re to be sponsored by Chubb, but the first since 2015.

Chubb has sponsored seven East Lane Re cat bonds that provided catastrophe reinsurance protection to the company between 2007 and 2015.

It has seemingly taken cyber risk exposure growth and the need for more reinsurance to protect against large cyber loss events, to bring the insurer back to market again.

Chubb has established a new Bermuda based vehicle named East Lane Re VII Ltd. for its first cyber catastrophe bond issuer, sources said.

East Lane Re VII Ltd. is expected to issue a single Class A tranche of Series 2024-1 notes, that will be sold to investors and the proceeds used to collateralize a cyber reinsurance agreement between the issuer and Chubb, to provide the protection.

The $100 million or greater in Class A notes will provide Chubb with a two-year source of protection against widespread cyber loss events, on an indemnity trigger and per-occurrence basis, we understand.

We’re told Chubb has segmented its cyber exposure into two buckets, North American and International and this East Lane Re VII cyber cat bond features attachment metrics for each, as well as an overall figure.

The Class A notes would attach at $600 million of North American losses, or $400 million of International losses, with coverage from the cyber cat bond spanning a $150 million layer of the tower for each.

We understand that the notes have an initial attachment probability of 2.142% and an initial expected loss of 1.387%. Breaking that down, the attachment probabilities are 0.686% for North America and 2.106% for International, while the expected losses are 0.538% for North America and 1.36% for International.

Sources said that the $100 million of cyber cat bond notes being initially offered for sale by East Lane Re VII Ltd. come with spread price guidance in a range from 8.75% to 9.25%.

It’s very encouraging to see a third cyber catastrophe bond come to market so soon after the first two, as this really begins to deliver on the experience cat bond funds and investors need with the peril, albeit that so far the amount of cyber risk limit in 144A cat bond form remains relatively small.

These are important steps in developing cyber risk as a true diversifier within the market and shows the potential for other major underwriters of cyber risks to turn to insurance-linked securities (ILS) capital for cyber reinsurance and retrocession.

You can read all about this East Lane Re VII Ltd. (Series 2024-1) catastrophe bond from Chubb and every other cat bond issued in the Artemis Deal Directory.