Deep pool of capital, cat bonds help meet cyber insurance demand: Beazley CEO

Commenting this morning alongside his firm’s results announcement, Beazley Chief Executive Officer (CEO) Adrian Cox said that a “deep pool of capital” is required to support growing demand for cyber insurance, while the company’s CUO Bob Quane noted that the capital markets are now stepping up in support.

Beazley has helped to pioneer the development of the cyber catastrophe bond market, with an impressive four transactions now listed in our Deal Directory, out of the seven private and 144A cyber cat bonds that have so far come to market.

It’s not just the transactions though, it’s the additional work that early cyber cat bond sponsors have put into helping the capital markets understand this new peril that have also made a difference.

This morning, Beazley CEO Adrian Cox said that, “To meet growing demand from clients for cyber insurance we believe it is vital for the industry to have access to a deep pool of capital which will allow it to hedge accumulation risk.

“We were therefore pleased, in January 2023, to be the first insurance company to launch a cyber catastrophe bond and to go further as the year turned with the launch of our first publicly traded cyber catastrophe bond.”

Bob Quane, Chief Underwriting Officer, also highlighted the importance of more capacity being available from reinsurance and insurance-linked securities (ILS) markets and how that can support the growth of cyber insurance.

“The innovations Cyber Risks has made over the last 12 months in the development of cyber catastrophe bonds and in addressing systemic or catastrophic cyber risk, have been made possible by the team’s ongoing work on modelling cyber risk,” Quane said. “We shared our approach to modelling catastrophic cyber with the market during 2023, detailing our move to a probabilistic modelling framework which is underpinned by third party data and our own models to give greater insight into cyber catastrophe scenarios.

“Looking forward there is growing business demand for cyber insurance and we are pleased to see that the insurance and capital markets are responding by providing the additional capacity the market needs to reach its potential.”

Beazley has also been working cross-market on the topics of systemic cyber risks and cyber war, with consensus nearing, CEO Cox explained.

“We are also seeing that broad market consensus is being achieved around the complex subject of cyber war, bringing clarity of purpose to the cover which is to the benefit of all,” he said.

Clive Bannister, Chairman of the Board of Directors at Beazley, also said, “Being a leader means both driving things forward and stepping back when market changes dictate. Leading is not easy, as the challenges in the cyber market this year have shown; but when systemic cyber risk needed to be addressed, Beazley was willing to ‘stand up’ and lead market thinking.”

CUO Quane, added, “2023 was also the moment when the market began to mature and address the challenges of systemic cyber risk, namely the possibility that a single cyber event or incident might trigger widespread failures and harmful impacts across multiple entities, sectors, or countries. We took a leading position in this with the robust approach we have championed, thus succeeding in bringing much needed clarity to the existing war exclusions. As we enter 2024, we are seeing broad market consensus.

“In our Cyber Risks division, our focus is always on understanding risk to improve our underwriting and protect against emerging threats. The substantial rate increases of 2021 and early 2022 moderated during 2023 and we expect this trend to be maintained.

“We are confident that with our cyber ecosystem in place, which provides comprehensive support to clients before, during and after a cyber attack, the environment remains attractive and demand-led growth will continue, notably across our international business and particularly in Europe where we see strong growth opportunities.

“In particular we see an opportunity to grow among businesses with revenues below $250m, where our expertise and experience of managing cyber risk adds real value to their operations.”

Beazley’s cyber underwriting division underwrote $1.184 billion in insurance premiums over the course of 2023, so only slightly up on the $1.157 billion written in 2022.

Read about Beazley’s cyber cat bond transactions, the three Cairney deals and its recent 144A Polestar Re cyber cat bond, by filtering our Deal Directory by peril to view only cyber cat bond transactions.

Read more on Beazley’s 2023 results over at our sister publication Reinsurance News.