The introduction of the first 144A cyber catastrophe bond transactions in the final quarter of last year was an important step in the development and advancement of the broader cyber risk transfer market, according to Damini Mago and Alice Woolley of Moody’s RMS.
The latest video interview in the Artemis Live series focuses on the emergence of the first cyber insurance-linked securities (ILS) transactions, following the issuance of four full 144A cyber cat bonds in the fourth quarter of 2023.
Artemis, our ILS-focused sister publication, spoke with Mago, Senior Product Manager, Cyber and Woolley, Lead Consultant, Risk Advisory, at Moody’s RMS about the importance of the market’s first full cyber cat bonds.
“It’s an exciting time,” said Mago. “2023 saw the first cyber catastrophe bonds come to the market. It was a watershed moment bringing this to the ILS market. And as I mentioned, by the end of quad four, we saw four 144A cat bond transactions securing about $415 million in protection for those sponsor.”
She explained that Moody’s RMS was both proud and delighted to support Beazley with risk modelling for its PoleStar Re cyber cat bond.
“We feel it’s the first big step to open the doors for those additional capacity that the market clearly needs, especially with the premium growth that’s expected from it. And we view this as a pivotal step in establishing cyber as a viable asset class for investors, contributing to the advancement of the cyber insurance market. So, definitely an exciting time,” added Mago.
The need for the capital markets to play a role in the cyber insurance and reinsurance space had been highlighted and debated prior to the arrival of the first transactions, with investor acceptance of and comfort with the complex risk a key component.
“It is really encouraging to see how ILS investors sort of stepped up and are getting to grips with this new challenge, this completely new peril. And they’re supporting not just one but multiple transactions,” said Woolley.
“So, we’ve seen really encouraging signs and that education has been a really key focus and a key part of this long journey of getting to where we are with the cyber transactions,” she added.
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Expanding on this, Woolley told Artemis that for those unfamiliar with cyber risk, it can seem like a huge, armageddon type risk. But, she continued, after you spend some time exploring the nuances and learning what’s actually covered in those insurance contracts and what the models can tell you about the risk, investor sentiment starts to shift.
“And as you build that sort of level of comfort, you start to see a shift in the investor community. They’ve been really receptive to sort of understanding the risk and extremely positive in supporting the transactions,” said Woolley.
“This is really the start of the journey, but we’re excited to see where that goes. And we’re really hoping to continue to work closely with the market, make sure that we continue that process of educating them as we continue to develop our models and learn more about cyber,” she added.
Watch the full video for more insights into the emerging world of cyber catastrophe bonds with Moody’s RMS’ Damini Mago and Alice Woolley.
The full video interview is embedded below and can also be viewed in full, along with previous Artemis Live video interviews, over on the Artemis YouTube channel.
You can also listen to audio versions of the interviews by subscribing to the Artemis Live podcast here.
All of the Artemis Live video interviews have a focus on reinsurance, ILS and the efficiency of risk transfer and can be accessed directly from the YouTube Channel.
