Parametrix has announced it is working to bring Insurance-Linked Securities transactions to market which would protect ceding re/insurers against a sustained outage of “the cloud” to which many are exposed through their cyber portfolios.
The leading provider of cloud downtime insurance suggests that a “Cloud-in-a-Box” transaction would employ a concrete, predetermined, and easily observed parametric trigger to transfer the outage of a specific cloud service or groups of services provided by a vendor in a pre-defined cloud service region.
Yonatan Hatzor, co-founder and CEO of Parametrix, commented, “Significant accumulation of cloud outage risk is already on the books of many insurers and reinsurers.
“Cyber insurance would become a much more attractive class of business if this potentially catastrophic accumulation risk were better managed. We can do that through ILS structures.”
Parametrix states that the global cloud computing market, defined by the amount spent on public cloud-based services, was an estimated $545.8 billion in 2022, with projected growth up to $1,240.9 billion by the year 2027.
Hatzor continued, “All indications show that this risk is not going to disappear. On the contrary. As such, we see the development of these ILS instruments as a vital element to support this growth.”
Dr Rom Aviv of RHA Advisory, a senior advisor to Parametrix, added, “The structure will follow either the cloud downtime exposures within cedants’ underlying portfolios, or will refer to a peak-risk region which could lead to a significant loss.
“Correlation between cloud outages and the broader economy is low, so cloud downtime risk is potentially diversifying for investors.
“It features a well-defined trigger mechanism, short-tail, and a very limited risk of trapped capital or loss inflation.”
Just last month, Parametrix monitored an outage of Microsoft Azure, the world’s second-ranked cloud service provider.
Part of the ‘Big Three’, which includes Amazon Web Services and Google Cloud Platform, Azure boasts a reported 22% global market share.
The outage event affected thousands of businesses and tens of thousands of users. Most companies impacted will be entirely uninsured.
According to the proprietary Parametrix Cloud Monitoring System, which immediately identified the outage, the incident lasted for approximately two hours and 24 minutes.
