Envelop Risk expects to deploy capital markets cyber capacity in 2024: CEO Spry

Envelop Risk’s Capital Markets business continues to gain traction and the firm is close to deploying capital markets capacity via its Augmented Re Class 3A Reinsurer, says Co-Founder and Chief Executive Officer (CEO), Jonathan Spry.

Cyber re/insurance underwriting firm, Envelop Risk, launched its Capital Markets business in 2022, naming insurance-linked securities (ILS) specialist, David Ross, as its head.

The practice was established to not just underwrite transactions but to also structure and underwrite transactions on behalf of ILS funds.

More than a year after its inception, Artemis spoke with the company’s CEO about its progress and the broader cyber-ILS space.

“It’s been very, very busy,” said Spry. “We are close to deploying capital markets capacity which we expect to have in use in 2024.”

He explained that Envelop Risk invests time with ILS funds and the broader capital markets, in order to figure out what makes sense and what they feel comfortable with, in terms of new ILS products.

The involvement of ILS funds and capital markets has been a hot topic for a while and are seen as vital participants in the expansion of the cyber re/insurance market.

So far, there’s been a few privately placed cyber catastrophe bonds and there’s also two full 144a transactions expected to close before year-end.

“The key thing here is that ILS is not limited to cat bonds. Yes, we have seen a few cyber cat bonds, but not a huge number,” said Spry.

“Actually, I expect most of the future ILS activity to be away from cat bonds, and probably more similar to sidecars, aligned vehicles – that’s more what we’re looking at,” he added.

This is where Envelop Risk’s aligned vehicle – Augmented Re – which is designed for partnering with clients, is where Spry expects the deployment of capacity to come from.

“But equally, within Lloyd’s there’s London Bridge and so on, so we don’t necessarily see a real need to use the cat bond structure. There are a lot of ways to get the capital markets involved,” said Spry.

As the need for cyber reinsurance and retrocession increases, the data-driven approach of Envelop Risk, the cross-functional expertise within the company and in its Capital Markets business, will help the ILS investor community gain confidence in understanding the risk as it continues to evolve.