Specialist insurer Beazley is tapping the capital markets for reinsurance protection against cyber risks and named storm and earthquake losses with its first two Rule 144a catastrophe bond transactions.
After sponsoring three private cyber cat bonds earlier this year, London headquartered Beazley has returned with its debut full 144a issuances, both of which are scheduled to settle in December and contribute to a record-breaking year for the cat bond and related insurance-linked securities (ILS) market.
Established in Bermuda, PoleStar Re Ltd. (Series 2024-1) is set to be the first full 144a cyber catastrophe bond from Beazley, providing the firm with at least $75 million of cyber reinsurance from the capital markets. The Class A tranche of notes attach at $500 million of losses to Beazley from a cyber event.
Beazley’s first 144a cyber cat bond follows a combined $81.5 million of cyber reinsurance the firm secured from the capital markets through the issuance of three privately placed deals.
It’s the second full 144a cyber cat bond ever, after AXIS Capital’s $75 million Long Walk Reinsurance Ltd. (Series 2023-1) transaction, scheduled to settle later this month.
Simultaneously, Beazley is sponsoring its first full 144a property cat bond, the currently $100 million sized London Bridge 2 PCC Limited (Fuchsia 2023-1), which provides the insurer with reinsurance coverage against US, Canada, and Caribbean named storms and earthquakes.
Interestingly, Beazley is using the Lloyd’s of London owned UK ILS structure, London Bridge 2 PCC Limited, to issue the cat bond notes. This transaction is also the first excess-of-loss cat bond to be issued by the Lloyd’s ILS structure.
So, it’s a positive for Lloyd’s and the ILS ambitions of the UK, while Beazley obtains a diversified source of reinsurance to protect its core underwriting entities against losses from two peak perils.
Artemis, our ILS-focused sister publication, tracks the catastrophe bond market and lists transactions since the market’s inception in the late 1990’s. The Artemis Deal Directory shows that it’s on track to be a record year for overall cat bond issuance, while 144a property cat bond issuance is also set to reach a new high.
Beazley is just one of a host of new sponsors to enter the cat bond market in 2023, suggesting that carriers are finding market conditions conducive and are able to secure reinsurance or retrocession at a cost comparable to the traditional market.
Reports suggest that insured losses from natural disasters will again breach $100 billion in 2023, which is likely to contribute to higher rates at the renewals but also to greater demand for reinsurance. As carriers look to mitigate potential losses from nat cats in a hard market environment, securing multi-year reinsurance from the capital markets has proved increasingly popular this year, for both repeat and new sponsors of cat bonds.
Further, there’s now been five cyber cat bonds across the private and full 144a deals, so it will be interesting to see if these types of deals gain traction and more sponsors look to the capital markets for their cyber reinsurance needs.
