Lockton Re completes first hybrid property cat and cyber ILW

Lockton Re has completed what it believes to be the first industry loss warranty (ILW) transaction combining property catastrophe and cyber triggers within a single limit structure.

The placement enables cedants to access protection against both property catastrophe and cyber losses through one ILW transaction.

The reinsurance broker said it was designed for global cedants seeking more economical ways to reduce their growing US cyber exposures.

The structure also gives capital providers access to multiple peak risks through a single, transparent mechanism using independently reported industry loss indices.

PERILS, working with CyberAcuView, acted as the index provider for the cyber trigger, while Verisk’s Property Claim Services was used for property catastrophe losses.

Lockton Re said the transaction reflected the increasing maturity of cyber industry loss reporting and demonstrated how the ILW market could develop beyond traditional property-only applications.

Tom Parcell, chief broking officer at Lockton Re Bermuda, said: “This deal reflects Lockton Re’s focus on innovation that supports our clients and builds on the breadth of products that can be traded in the market.

“As the ILW market continues to evolve, we are seeing broader demand from clients for risk solutions that look at new structures and integrated options, and we are particularly excited about the opportunity for growth in this space with more bespoke, alternative index covers for our clients.”

Theo Norris, international ILS and cyber ILS leader at Lockton Re Capital Markets, said the placement highlighted the convergence of property catastrophe and cyber risk transfer.

“This deal highlights trends we are seeing with the convergence of property catastrophe and cyber risk transfer, the growing maturity of industry cyber loss indices, and the development of new capital solutions for the market,” he said.

Lockton Re Capital Markets is also developing catastrophe bonds combining property and other lines of business, including cyber, across multiple tranches.

Norris said: “The way Lockton Re is structured and our lack of internal silos means we can quickly adapt, understand, and work in teams built around clients to maximise new opportunities.”

Lockton Re expects further growth in hybrid ILWs, collateralised reinsurance and catastrophe bond structures as cyber loss reporting develops and buyers seek more efficient protection.

Norris added: “Lockton Re Capital Markets is going one step further, establishing catastrophe bonds with property and other lines of business, including cyber, across multiple tranches.”