Beazley says no change to combined ratio guidance after CrowdStrike
Reflecting the seriousness of the CrowdStrike related global IT outage, leading cyber insurer Beazley has provided an update to the market saying that it does not expect any change to its combined ratio guidance after this event.
It’s a move designed to settle the nerves of investors and shareholders in the company, it seems, but it’s also the first signal for industry loss expectations after the major digital disruption event.
Beazley said this morning that, “Given the unprecedented nature of this event and Beazley’s position as a leading cyber insurer, the Company has elected to provide an update on its position in relation to the outage.
“Based on what is known at this point, the event will not change the current undiscounted combined ratio guidance of low-80s for the full year.”
The company said a further update will be provided when its first-half results are announced in August.
This statement from Beazley may also help to settle the nerves of any catastrophe bond investors that have been unsure of the potential ramifications of the CrowdStrike event for the still relatively new cyber cat bond market.
Beazley’s statement suggests that, while the CrowdStrike event will drive cyber insurance related losses, it may not be the cyber catastrophe sized industry loss event some have been fearing.
Beazley has two 144A cyber catastrophe bond issues in-force today, the $140 million PoleStar Re Ltd. (Series 2024-1) issuance from last December and the more recently issued $160 million PoleStar Re Ltd. (Series 2024-2).
Both provide critical cyber reinsurance to Beazley to help the company when a major cyber catastrophe event occurs.
The PoleStar Re 2024-1 notes would see their coverage attach at $500 million of losses to Beazley from a cyber event, covering a share of losses to $800 million.
We believe the PoleStar Re 2024-2 notes share that same $300 million layer, filling out the coverage of that segment in Beazley’s cyber reinsurance tower which has been capital markets supported for a while, first by collateralised reinsurance, later by private cat bonds and now 144A cat bonds.
A $500 million hit to Beazley from a cyber insurance industry loss event would suggest a relatively meaningful hit to its combined ratio and an industry-wide loss in the billions of dollars.
Hence, with the company continuing to guide to its original predictions, it seems that perhaps these catastrophe bonds are set to prove remote of the firm’s losses from the CrowdStrike outage.
Of course, we don’t know what sits beneath the cat bonds, or how low down reinsurance kicks in, nor if Beazley’s guidance is net of reinsurance effects.
But still, this seems an encouraging statement from the company and one that should help to settle both its own shareholders and also those invested in the Beazley-sponsored cyber catastrophe bonds.
Also read:
– CrowdStrike outage: Cyber cat bond prices stable, uncertainty palpable.
– CrowdStrike tests cyber cat bonds & reinsurance, demonstrates importance: Aon’s Egan.
Read about every cyber cat bond transaction, including the first private cat bond deals and the more recent 144A cyber cat bonds, by filtering our Deal Directory by peril to view only cyber cat bond transactions.
