LONDON:
Aon plc has launched a new product with Hudson Structured Capital Management Limited (undertaking its re/insurance business as HSCM Bermuda) to protect insurers and reinsurers against systemic and catastrophic cyber events.
Aon and HSCM have already closed the first transaction, a retrocession contract on behalf of an undisclosed cedent.
The cover allows for limits of up to USD 70 million and will protect against increasing cyber loss aggregations on re/insurers’ balance sheets. The product is structured to protect the cedent from the effects of catastrophic cyber market losses stemming from events such as self-propagating malware or wiperware, distributed denial of service, a significant cloud outage or certificate revocation.
C–suite awareness, reputational risk and regulation – in addition to an increase in cyber attacks – are driving rapid growth in the cyber insurance market, with premiums expected to rise from USD6 billion in 2019 to USD20 billion by 2025, according to Aon and market analysis.
Insurers play a critical role in providing cover for businesses to protect their assets from cyber risk but the supply of traditional reinsurance cover is being challenged by demand. Now, Aon is enabling re/insurers to rethink access to capital with a new source of capacity and protection from the capital markets.Luke Foord-Kelcey, International Head of Cyber at Aon’s Reinsurance Solutions, said:
“In addition to increased claims activity in the cyber market, the current global crisis has emphasised the need for re/insurers to protect for systemic events. We are enabling carriers to navigate new forms of volatility by expanding the cyber reinsurance and retro markets to address this risk’s inherent systemic exposures,'' he said..
Edward von Herberstein, Partner & Chief Underwriting Officer – HSCM Bermuda, added: “We are excited to help cedents transfer their cyber risk through this innovative and ILS-friendly structure with Aon. This is a great example of insurance and ILS markets offering risk transfer solutions for intangible assets, an area of the market where we expect to see a growing number of opportunities in the years to come.”