Cerchia platform transacts first cyber ILW using PCS Global Cyber trigger

Swiss-headquartered fintech Cerchia has continued to build momentum around its capital markets focused direct risk transfer platform, with a particularly notable cyber trade, that saw a cyber industry-loss warranty (ILW) transacted using a PCS Global Cyber industry-loss index trigger.

In fact, this is the first cyber trade to use the PCS Global Cyber industry loss trigger, which is a landmark for the reinsurance, risk transfer and insurance-linked securities (ILS) market.

With cyber activity gathering momentum in the ILS space, with now three 144A indemnity cyber catastrophe bonds having emerged in recent weeks, this first cyber ILW trade using a PCS index trigger could open up more potential for retrocessional capacity buyers.

Cerchia has integrated the PCS Global Cyber industry loss index into its direct risk transfer platform, which utilises data from the Verisk unit PCS (Property Claim Services), that can be used in designing risk transfer triggers and determining whether catastrophic cyber events attach their coverage.

This expands Cerchia’s risk transfer capabilities beyond pure property catastrophe risk, which had been its focus up to now.

The cyber ILW trade addressed a buyer’s need to protect against the increasing threat of catastrophic losses from cyber events, Cerchia explained.

In addition, Cerchia has also disclosed that a California wildfire trade has also been completed on its platform.

Both were peer-to-peer transactions, fulfilling Cerchia’s direct risk transfer mandate.

They were executed by undisclosed buyers, which Cerchia notes reflects its platform’s “commitment to confidentiality and security,” while also showing how its platform allows for a unique, self-service approach, as businesses and insurance companies can directly place bids for protection on a dedicated board.

Cerchia said that this is attracting alternative capital providers, as they appreciate the way its platform and marketplace is structured, while also delivering on a promise for optimal execution.

In addition, buyers can agree on a range of collateral options.

For the PCS Global Cyber ILW deal, we understand that US Treasuries were used as collateral, allowing the alternative capital providers to benefit from collateral yield, as well as the risk premium from the cyber coverage.

Low fees is another promise of the Cerchia platform and we’re told they are very competitive for this kind of trade.

It’s encouraging to learn of a first cyber industry-loss trade using the PCS Global Cyber index trigger, as this will help prove the concept and could stimulate more cyber ILW or industry loss cyber cat bond activity.

Cerchia had revealed its first trade back in September, when a buyer and seller came together to transact a $100bn PCS trigger Florida wind industry-loss arrangement on its platform.