AXIS sponsoring the first 144a cyber cat bond, $75m Long Walk Re

Specialty re/insurer AXIS Capital is set to become the sponsor of the market’s very first 144a cyber catastrophe bond, with a $75 million Long Walk Reinsurance Ltd. (Series 2023-1) transaction being marketed to insurance-linked securities (ILS) funds and investors, Artemis can reveal.

The market has been building up to this issuance for some time, with cyber insurance-linked securities (ILS) gaining traction among the investor base and a number of private cyber cat bond deals already completed.

In 2022, AXIS Capital underwrote almost $645 million of cyber gross written premiums, with the line of business making up 12% of its total GWP for last year, while the company wrote almost $335 million of cyber risk GWP in the first-half of 2023.

As a result, the company is one of the largest insurers and reinsurers with a specialism in cyber risk, so turning to the capital markets and the 144a catastrophe bond market as a source of reinsurance is a natural step.

For its first cyber catastrophe bond, we’re told that AXIS Capital has established a new Bermuda based company named Long Walk Reinsurance Ltd. to become the special purpose insurer (SPI) that will issue series of cyber cat bonds for the firm.

Long Walk Reinsurance Ltd. will issue a single tranche of Series 2023-1 notes, provisionally sized to provide AXIS $75 million of cover, that will be sold to investors and the proceeds will be used to fully-collateralize a reinsurance agreement to protect AXIS against certain cyber losses.

We understand that the cyber reinsurance coverage from the Long Walk Reinsurance catastrophe bond will provide coverage to benefit AXIS’ main underwriting subsidiaries, including its Lloyd’s syndicate, insurance and reinsurance companies, so providing broad coverage for major cyber loss events that affect the firms portfolios.

The Long Walk Re 2023-1 cyber cat bond notes will cover what are being termed systemic cyber events, sources said, with that coverage structured on an indemnity trigger and per-occurrence basis.

This cyber cat bond will provide AXIS Capital with reinsurance against systemic cyber losses over a two year term, beginning from the start of 2024.

We’re told the $75 million of Series 2023-1 Class A notes that Long Walk Reinsurance Ltd. is offering will provide their reinsurance from an attachment point of $510 million, covering a share of losses across a $140 million layer of AXIS’ cyber reinsurance tower.

The Class A notes come with an initial attachment probability of 2.46%, an initial expected loss of 1.97% and are being offered with spread price guidance of 10%, we understand.

It’s said that CyberCube is the risk modelling agency for this first 144a cyber catastrophe bond, while Aon Securities is the sole structuring agent and bookrunner.

The market has been working hard to educate the investor base on cyber risks and on defining a structure that works, with robust event definitions and appropriate language for many months now.

So it is down to the hard work of the many parties involved in this deal, AXIS as sponsor, Aon Securities in structuring the deal, CyberCube as modeller, all of the other parties such as law firms and insurance manager, as well as the receptiveness of the ILS fund manager and investor base to look at and assess new risks, that this first full cyber catastrophe bond deal is now in the market.

This first 144a cyber cat bond will be watched closely as it progresses to market and a successful placement could be the first of a number of new issuances, as we understand other potential sponsors are also working towards similar deals.

You can read all about this first 144a cyber catastrophe bond Long Walk Reinsurance Ltd. (Series 2023-1) and details of every other cat bond in our extensive Artemis Deal Directory.