US cyber industry loss index marks first application

PERILS, in collaboration with CyberAcuView, has announced the inaugural application of its US Cyber Industry Loss Index in cyber insurance risk transactions.

The US Cyber Industry Loss Index is designed to report on affirmative primary cyber market losses within the US that result from systemic cyber incidents impacting multiple insurers and policyholders, specifically for events with industry losses exceeding US$500 million. Given the escalating risks associated with systemic cyber losses, the index aims to offer an independent estimate of cyber industry losses from US systemic events, facilitating its use in transactions involving alternative capital.

The mechanism of the index involves generating an index value to ascertain the payouts under Insurance Linked Securities (ILS) and Industry Loss Warranty (ILW) contracts. The determination of cyber industry losses is based on loss data collected from US cyber insurers by CyberAcuView, with the industry-level calculations receiving joint approval from both CyberAcuView and PERILS. It’s important to note that all data services operate under rigorous antitrust supervision to ensure compliance and integrity.

Since its inception in September, there has been a concerted effort by PERILS and CyberAcuView to engage with key industry stakeholders, aiming to promote awareness and acceptance of the loss index, they claim.

This has led to the placement of the first 144a ILS using an industry loss trigger, sponsored by Swiss Re, alongside the completion of an ILW reinsurance contract utilizing the index. This achievement signifies a milestone for the cyber insurance sector, introducing a new method for managing cyber risk through industry loss triggers.

“As the risk of systemic cyber loss events grows, it is increasingly important to ensure sustainable capacity is available to support the US cyber sector. We believe our loss index can play an important role in enabling the expansion of the cyberILS and ILW markets by providing independent systemic loss estimates,” PERILS CEO Christoph Oehy said.

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