Specialist re/insurer Hiscox has released a statement commenting on its recent cyber parametric risk transfer deal, which was completed with help from Guy Carpenter and PCS.
Announced earlier this month, the trade was transacted electronically on the AkinovA marketplace, with full regulatory oversight from the Bermuda Monetary Authority (BMA).
The product traded was a quarterly parametric cyber instrument that was purchased by an asset manager in the financial services sector.
Coverage focusds on assets that are exposed to cyber related disruption impacting underlying power generation assets in the US.
Hiscox developed and structured the product and provided capital for the transaction, while Guy Carpenter acted as broker and PCS as the reporting agent.
Adam Szakmary, Director of Underwriting – Bermuda, Hiscox Re & ILS, commented on the transaction: “In an ever-changing and rapidly growing market, it’s important to challenge ourselves to find new and innovative opportunities to advance risk markets, especially in areas like cyber where the traditional approach may be falling short.”
“AkinovA’s approach to enhancing electronic trading is a great example of this pioneering spirit, however, to make vision a reality it was a team effort across underwriting, analytics, wording, operations, and finance,” Szakmary continued.
“We are thrilled to be involved in this transaction and to be early advocates for the expansion of the risk cyber risk transfer market.”
Erica Davis, Cyber Risk Strategy Leader and Managing Director of Guy Carpenter & Company, further stated: “This first-to-market cyber parametric transaction shows the emergence of innovative structures and triggers to address this quickly evolving risk.”
“By developing a trigger for power outage originating from a cyber event, this deal helps to solve a relevant and substantial protection gap. As a global leader in cyber modelling and placement design, Guy Carpenter was uniquely qualified to execute this market-transforming opportunity,” Davis explained.
“Cyber risk presents distinct quantification challenges and only through creating such solutions can we develop a robust cyber market positioned for sustainable growth.”
Tom Johansmeyer, Head of PCS, a Verisk business, added: PCS has been a strong supporter of exchange-traded risk for years, and we believe that this type of vehicle can be instrumental in helping to grow the cyber market. Demand for cyber cover has grown so quickly that capacity shortfalls have become an important topic of conversation in the market.”
“Relying on traditional practices won’t be enough to support the further expansion of the most important class of insurance business to arise in decades. This latest transaction shows that new ideas can take hold and deliver rapid benefit up and down the risk and capital supply chain. We’re proud to have been part of this process.”
AkinovA and its users also used services from Horshoe during this transaction, and worked closely with key partners including OpenFin and Aquis Technologies.