Swiss Re: $50m cyber ILW is “novel and complementary” retro cover

Swiss Re secured $50 million of cyber industry-loss warranty (ILW) cover recently in a transaction that the broker involved, Gallagher Re, is hailing as the first cyber retrocession ILW ever traded.

The transaction was supported by a number of specialist reinsurers, according to Gallagher Re.

We cannot be certain, but there is a chance that this $50 million cyber industry-loss warranty (ILW) trade is actually the same trade as the 144A securitized Matterhorn Re Ltd. (Series 2023-1) issuance that we covered last year.

It’s possible Swiss Re simply transformed the ILW arrangement into a 144A format, to make it more broadly acceptable to catastrophe bond investors and funds.

It is also possible that the $50 million cyber ILW is in addition to the $50 million of cyber industry loss protection from the Matterhorn Re cat bond, which is perhaps more notable as it shows Swiss Re securing even more industry-loss based cyber retro.

Either way, the coverage provided by the $50 million cyber industry-loss warranty (ILW) protects Swiss Re against catastrophic US cyber events, including coverage for widespread malicious ransomware or malware, prolonged catastrophic cloud outage and systemic data breach, the companies involved explained.

Commenting on the coverage provided, Nick Meuli, Head of P&C Capacity Management at Swiss Re, said, “Accessing alternative external sources of cyber capacity to support our inwards cyber business has been a key priority for us.

“We are very pleased to have secured significant ILW protection which provides yet another novel and complementary cover for our cyber portfolio.”

Ian Newman, Global Head of Cyber at Gallagher Re, further explained, “Alongside traditional retro and cat bond solutions, we believe ILWs and parametric solutions will form a critical part of the cyber value chain in the coming years.

“We are proud to have delivered another market first on behalf of Swiss Re, a true market leader in this space.”

Gallagher Re said that, “Swiss Re’s purchase of cyber market’s first Retro ILW comes after years of work in the field and reflects a market which is growing in confidence.”

The broker is expecting further growth of the cyber insurance-linked securities (ILS) market, with more cyber cat bonds expected to be issued.

Theo Norris, Head of Cyber ILS at Gallagher Re, added, “Successfully executing this innovative solution for Swiss Re is another step forward in broadening the potential access for capital to enter the Cyber insurance space and to provide effective, alternative solutions for insurers and reinsurers alike.”

As said, this could be the same arrangement as the Matterhorn Re 144A cyber industry-loss securitization that we had covered back in December, which was the first industry-loss triggered cyber cat bond to hit the market.

That deal took the number of completed cyber cat bonds to four, with four deals priced and a range of structural feature that can be incorporated into cyber cat bonds, including the industry-loss trigger, now tested and approved by the investor base.

As we reported at the time, the industry-loss trigger uses data from CyberAcuView, with PERILS acting as the reporting agency. The industry-loss trigger attaches at a $9 billion US cyber insurance industry loss, as reported by the agencies above.

You can read all about the industry-loss trigger cyber catastrophe bond from Swiss Re, the Matterhorn Re Ltd. (Series 2023-1) transaction, and every other cat bond ever issued in the Artemis Deal Directory.