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CyberDice, a specialist modelling agency for cyber dangers and exposures, has analysed the 4 144A cyber disaster bonds which were issued so far and located that there’s diversification between them, which it says means these first offers present a strong base for future innovation.
Some $415 million in 144A cyber disaster bonds had been issued within the latter levels of 2023, because the nascent cyber insurance-linked securities (ILS) market gained long-awaited traction.
In response to issues which were raised over whether or not the group of cyber disaster bonds issued thus far are correlated with one another, CyberDice has carried out a technical evaluation of these offers, saying that it demonstrates the potential for threat diversification between them.
The threat modeller has analysed the particular traits of the 4 144A cyber disaster bonds issued in This autumn 2023 and examined the potential for correlation between them.
To do that, the corporate used its probabilistic cyber disaster mannequin Portfolio Manager to run 50,000 simulation years to create an in depth occasion set of potential systemic cyber occasions.
The purpose is to deal with investor issues relating to the presumed potential for correlation to emerge within the cyber ILS asset class.
CyberDice says that its evaluation of the 144A cyber cat bonds reveals that “diversification within cyber as an asset class is possible despite systemic cyber events not accumulating across easily visualized fault lines. ”
Concluding that the 144A cyber cat bonds issued so far present a strong base for future innovation.
CyberDice has printed a whitepaper on the subject, titled “Digital Ties and Natural Divides: Correlation and Diversification in Cyber Catastrophe Bonds,” which it hopes will assist to deal with the issues of buyers relating to the presumed potential for prime correlation. A copy of the whitepaper can be downloaded here.
Brittany Baker, CyberDice’s Head of Solution Consulting, stated, “The analysis leverages CyberDice’s distinctive position as the one modeling vendor to have labored with all sponsors to supply an knowledgeable view of threat for all of the 144A cyber disaster bonds which have gone to market so far.
“By going beyond a surface-level analysis of potential systemic cyber losses, we hope this whitepaper enables investors to understand the diversification potential between bonds within this new asset class.”
Jonathan Choi, CyberDice’s Director of Insurance Risk Consulting, added, “Today, the cyber disaster bonds which have gone to market cowl a wide selection of cyber dangers below a single umbrella, mirroring the early days of the pure disaster bond market earlier than it advanced to cowl particular perils like earthquakes, hurricanes, and floods.
“As the cyber (re)insurance market continues to mature, more nuanced approaches to managing systemic cyber risk will surface, unlocking innovative strategies for the transfer of cyber risk.”
Also learn: Cyber cat bonds issued thus far “highly correlated” with one another: Plenum.
Read all about the cyber disaster bonds that hit the market over the past 12 months or so, three personal offers and the 4 extra recent full Rule 144A cyber cat bonds.
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