Beazley to sponsor 144a cyber catastrophe bond by year-end

Beazley, the London headquartered specialty insurance and reinsurance underwriter, is at an advanced stage of planning for its first full Rule 144a cyber catastrophe bond, with an issuance expected by year-end to tie in with the maturity of its private cyber ILS deals and its cyber reinsurance renewal for January 1 2024, Artemis has learned.

Beazley has already sponsored three private cyber catastrophe bonds so far this year, becoming the first company to enter the cat bond market to source fully-collateralised cyber reinsurance protection from capital market investors.

Those three private cyber cat bonds, the Cairney series of insurance-linked securities (ILS), have provided Beazley with an aggregate $81.5 million of cyber reinsurance protection.

The Cairney transactions have enabled Beazley to transfer a growing amount of risk to the capital markets, building on a number of collateralised reinsurance deals it had completed prior to 2023, where it began to tap certain ILS investors for cyber reinsurance capacity.

They have also allowed Beazley to build relationships with ILS fund managers and investors, getting them up to speed on its cyber underwriting practices and reinsurance needs.

Now, we’ve been told by sources that Beazley is at an advanced stage of planning its first full Rule 144a cyber catastrophe bond and this is anticipated to more than replace the coverage from the Cairney private cat bonds, which all mature at the end of this year.

We understand that the goal at Beazley is to at least fully-replace the expiring private cyber cat bond coverage, with our sources suggesting we should expect Beazley’s first full cyber cat bond could aim for around $100 million of reinsurance for the company, perhaps more.

Sources also told Artemis that Beazley is working with RMS as the third-party risk modelling agency for its first 144a cyber cat bond.

The protection will be indemnity focused, we understand, so mirroring the private Cairney cyber cat bond series of deals.

Each of the Cairney private cyber cat bonds provide Beazley with coverage against certain losses from remote probability catastrophic and systemic cyber events, so offering the company broad coverage for cyber and tech errors & omissions (E&O) and cyber catastrophe risks on an indemnity trigger basis.

Those private cyber cat bonds attached above $300 million of losses to Beazley and it’s anticipated that a 144a cyber cat bond could cover a similar layer of the firm’s growing cyber reinsurance tower.

At this stage we have not seen any signs of an issuance vehicle or any marketing of this first 144a cyber cat bond from Beazley, but we are told it is likely imminent, launching to investors perhaps within weeks.

Of course, AXIS Capital has got out to market with its first 144a cyber cat bond first, with its Long Walk Re 2023-1 cyber cat bond being put in front of ILS investors just this week.

So it’s encouraging to see another full cyber cat bond is expected to come to market this soon, meaning investors will have two Rule 144a cyber catastrophe bonds to analyse and possibly invest in before year-end.

It’s also good to see a different modeller working with Beazley on its cyber cat bond, in RMS, as the more risk models gain acceptance with the ILS investor base, the more readily the cyber ILS market is likely to gain traction and grow to provide the much-needed additional reinsurance capacity that large writers of cyber insurance risk require.

You can read about all of the cyber cat bonds we’ve covered, so that’s Beazley’s three Cairney deals and the new 144a Long Walk Re cyber cat bond from AXIS, by filtering our Deal Directory by peril to view only cyber cat bond transactions.

As soon as we see any signs of, or gain sufficient information about Beazley’s 144a cyber cat bond it will also be added to the Deal Directory.