Swiss Re successfully prices market’s first industry-loss cyber cat bond

Artemis has now learned that global reinsurance firm Swiss Re has successfully priced the market’s first industry-loss triggered cyber catastrophe bond, securing the $50 million of coverage it had originally targeted from the Matterhorn Re Ltd. (Series 2023-1) transaction.

Swiss Re entered the market with the first industry-loss triggered cyber catastrophe bond earlier this month, seeking $50 million of retrocessional reinsurance against systemic cyber insurance market loss events that affect the United States.

It is both the first cyber cat bond from Swiss Re and also the first to use an industry-loss index trigger.

Now, with this Matterhorn Re cyber cat bond priced, it has taken the number of 144A cyber cat bonds to have successfully passed the market’s approval test to four.

But this one is important being an industry-loss trigger, even though regionally constrained, as it signals the cat bond investment market’s acceptance of something other than cyber indemnity coverage.

We now await the first cyber parametric trigger, which would provide the full spectrum of cat bond triggers to potential cyber re/insurer sponsors.

So, it is now confirmed that Swiss Re’s Bermuda based SPI Matterhorn Re Ltd. will issue a $50 million tranche of Series 2023-1 notes, denoted as Class CYB-A notes.

Those notes will collateralize and fund a $50 million retrocession agreement, between the issuing vehicle and Swiss Re, providing the reinsurer with US cyber retro coverage across a just over two year term to the end of 2026.

The protection will be for cyber industry insured losses from the United States, on a per-occurrence basis, as reported by PERILS AG, and from an attachment point that is set at a US cyber industry loss of $9 billion or greater.

The Matterhorn Re 2023-1 Class CYB-A cyber cat bond notes come with an initial expected loss of 1.721%.

They were first offered to cat bond investors with price guidance in a range from 10% to 11%, but that was subsequently raised to 12%, as we reported.

We’re now told that this is where the notes have been priced, for the spread of 12% and so above the initially marketed range of spreads that were first targeted.

So investors have required a higher level of spread, than was initially on offer, to encourage them to allocate to this industry-loss trigger cyber cat bond deal.

As this is the first cyber deal to feature an industry-loss trigger and only the fourth cyber cat bond ever, it’s not that surprising.

The cyber catastrophe bond market has developed fast, with now four transactions priced and a range of structural feature that can be incorporated into cyber cat bonds tested and approved by the investor base.

You can read all about this new cyber catastrophe bond from Swiss Re, the Matterhorn Re Ltd. (Series 2023-1) transaction, and every other cat bond ever issued in the Artemis Deal Directory.