The cyber insurance market is certainly growing. One of the largest reinsurance companies, Beazley, has obtained a cyber catastrophe bond to enable them to grow their market. This is the first such global insurance catastrophe bond and it’s a $45 million bond. It gives them indemnity against all perils in excess of a $300 million catastrophic event.
This is the first time that a liquid insurance link securities instrument has been created for these risks. The reason why is that it’s a growing market and insurance companies know they need to add coverage and add capacity for these excess and surplus lines. The reinsurance bond is designed to cover them in case there are multiple catastrophic systemic events. So that if the insurance company has a lot of claims at once because there’s an event that hits their insured, they have excess capacity.
According to the article, “it’s vital to allow the supply of capacity to the cyber insurance market to increase to meet growing demand.”
That’s the key, and that’s what we’re seeing. Most of the new coverage for commercial lines is happening in the cyber area. The additional coverages for things like property damage, even personal liability, fire, and theft have stabilized. Many businesses have no cyber coverage at all, so any coverage is incremental growth. So this is something we’ll continue to see in the future where reinsurers and underwriters are looking for additional capacity to make sure they’re liquid so they can go from excess and surplus lines to admitted carriers and have coverage for their insureds.
Another quote from the article, “this helps bring new capacity to the global cyber insurance market to keep pace with rapidly rising demand.”
The demand is not just incrementally going up like in other areas, it’s going through the roof because a lot of companies don’t have cyber insurance and they’re looking to add it.