Beazley, the London-headquartered specialist insurance and reinsurance underwriter, has now entered the 144A catastrophe bond market with its first cyber deal, seeking $75 million in reinsurance from this (Series 2024-1) cyber cat bond issue, Artemis can report.
We exclusively reported in October that Beazley was expected to hit the market with its first full Cybercat 144A bond before the end of this year..
Beazley had previously sponsored three private cyber catastrophe bonds so far this yearbut we were told that a renewal of coverage would likely be in the full form of a 144a cat bond, and this new PoleStar Re cyber chat bond appears to be that deal.
The private cybercat bonds, the Cairney Series of Insurance-Linked Securities (ILS), together provided Beazley with a total of $81.5 million in cyber reinsurance protection through the end of this year.
We understand that Beazley aims to at least replace that, if at all possible, and this PoleStar Re 2024-1 cyber cat bond is being launched with a target of $75 million or more, we can now report.
PoleStar Re Ltd. was created in Bermuda for the issuance of catastrophe bonds for Beazley, we believe, with only one tranche of Series 2024-1 notes offered this time.
Of note, this is Beazley’s first-ever full catalytic 144a bond, as it has previously never sponsored an ILS 144a operation exposed to catastrophe risk.
We’re told the notes issued by PoleStar Re will provide Beazley with broad reinsurance coverage against major cyber losses affecting its underwriting entities, including Lloyd’s syndicates and its US insurers.
This cyber reinsurance cover will be based on a compensation trigger and per event, over a period of two years until calendar years 2024 and 2025.
The $75 million PoleStar Re Series 2024-1 Class A notes would tie their coverage to $500 million in losses for Beazley following a cyber event, we estimate.
Sources said this gives the notes an initial foreclosure probability of 1.71% and an initial expected loss of 1.26%.
We are told that these cyber cat bonds are being marketed to catalytic bond funds and investors with spread price predictions of between 12% and 13%.
It is good to see this second comprehensive cyber catastrophe bond transaction now in the market and aiming to be completed before the end of the year.
As AXIS Capital deal progresses and which is expected to be evaluated in the coming days, this sends a strong signal that investors in insurance-linked securities (ILS) welcome this new peril and are ready to evaluate it, investing in it when appropriate for their wallets.
It is also encouraging to note that this second comprehensive cyber disaster bond agreement considers RMS as the risk modeler, so there are now two separate modeling companies working on 144a cyber disaster bond agreements (CyberCube models the AXIS deal), which is good for the market. .
In addition, Gallagher Securities is structuring and proposing this operation, which means that a second broker is also involved (Aon is working on the AXIS operation), again very positive for the growth potential of the cybercat bonds market.