Cyber Cat Bonds

Our latest market commentary addresses the topic of cyber cat bonds, as this risk class within the cat bond universe will gain importance in the medium term.

Risks associated with failures or vulnerabilities of computer systems or entire networks have long been tacitly covered by other insurance lines. After losses became more frequent and individual events caused ever-larger damages, this risk class established itself as an independent coverage type in insurance about a decade ago. The extremely rapid growth in complexity and interconnectivity of modern computer systems, and the increasing reliance of production and communication systems on IT-based infrastructure, threatens loss scenarios that will push the capital available in the reinsurance industry for these risks to its limits.

For this reason, first solutions have been developed in the last two years that involve the ILS market in this new risk class. The first public cat bonds came to market at the end of 2023. These securities offered a high coupon, but whether they also represent a good risk-adjusted investment remains to be seen. In our latest market commentary we share some thoughts on this topic.