Cyber ILS: How Acute Demand Could Drive a Scalable Retro Market

Authors

  • Tom Johansmeyer PCS, Verisk, Bermuda
  • Alex Mican PCS, Verisk, United States

Keywords:

Cyber, Insurance, Reinsurance, Risk Management, Insurance Linked Securities, Risk Transfer

Abstract

Increasing demand for cyber re/insurance and a shortage of supply have made the need for fresh risk capital acute. After years of seeking support from the insurance linked securities (ILS) market, re/insurers may be on the brink of a major change. PCS has conducted original research with 24 ILS funds representing nearly 80% of the sector as measured by assets under management. ILS appetite for cyber re/insurance risk has increased, with many funds interested in entering the market this year. Historical barriers such as structure and modeling may not be as problematic as they were in the past, and narrowing spreads on cyber ILS have made the risk more attainable for providers of collateralized protection. Market dynamics have pushed pricing to levels that ILS funds can reasonably contemplate, which means that scale may soon follow.

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Published

2022-06-30