First cyber cat bonds a watershed moment: Moody’s RMS video interview

The successful issuance of the first full cyber catastrophe bonds in late 2023 was a watershed moment and the role of risk models in helping insurance-linked securities investors get up to speed on what is still a relatively new peril to the ILS sector was key, executives at Moody’s RMS told us in an Artemis Live video interview.

cyber-catastrophe-bonds-moodys-rms-jan2024To find out more about the role of risk models in getting the first cyber cat bonds to market successfully, we spoke with Moody’s RMS executives Damini Mago – Senior Product Manager, Cyber and Alice Woolley – Lead Consultant, Risk Advisory, recently.

With now four full 144A cyber catastrophe bonds successfully brought to market, the role of risk models has been critical in helping cedents to access an important new source of reinsurance capital and for investors to understand the exposures they were being presented with.

Moody’s RMS Senior Product Manager, Cyber, Damini Mago said that, “2023 saw the first cyber catastrophe bonds come to the market. It was a watershed moment bringing this to the ILS market and as by the end of quarter four, we saw for 144A cat bond transactions, securing about $415 million in protection for those sponsors.

“We feel it’s the first big step to open the doors for that additional capacity that the market clearly needs, especially with the premium growth that’s expected from it.

“We view this as a pivotal step in establishing cyber as a viable asset class for investors, contributing to the advancement of the cyber insurance market. So, it’s definitely an exciting time.”

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>> Modeling Cyber Risk for the ILS Market. <<

Helping investors to gain an understanding of the peril category that is cyber and precisely what risks these cyber cat bonds cover, was a key part of the process towards opening the ILS market up for cyber cedents.

Alice Woolley, Lead Consultant, Risk Advisory at Moody’s RMS explained, “It is really encouraging to see how ILS investors stepped up. They’re getting to grips with this new challenge, this completely new peril, and they’re supporting not just one but multiple transactions.

“So, we’ve seen really encouraging signs and education has been a really key focus and a key part of this long journey of getting to where we are, with the cyber transactions so far.”

During the interview, Mago and Woolley also discussed the Moody’s RMS cyber risk model and what it covers, as well as how it was applied to the cat bond issues we’ve seen so far.

The importance of robust cyber loss event definitions was also explored and the pair also commented on the range of cyber cat bond structures that the market has seen thus far, as well as their hopes for a vibrant cyber cat bond market going forwards.

Watch the full video for more insights into the exciting new world of cyber catastrophe bonds with Moody’s RMS’ Damini Mago and Alice Woolley.

The full video interview is embedded below and can also be viewed in full, along with previous Artemis Live video interviews, over on our YouTube channel.

You can also listen to audio versions of our interviews by subscribing to the Artemis Live podcast here.

All of our Artemis Live video interviews have a focus on reinsurance, ILS and the efficiency of risk transfer and can be accessed directly from our YouTube Channel.

You can also listen in audio to these interviews by subscribing to the Artemis Live podcast here.

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