The Cyber Insurance Linked Securities (ILS) market is rapidly emerging as a crucial alternative capital source for the expanding cyber insurance sector. With over $750 million invested in underwritten 144A catastrophe bonds and growing recognition among ILS investors, Cyber ILS is becoming an essential tool for underwriters aiming to manage systemic risks and increase capacity.
Cyber ILS addresses two significant challenges in the cyber insurance market. Firstly, as the market is expected to more than double in size over the next decade due to increased awareness of cyber risks, ILS provides a broader capital base to support sustainable growth. Secondly, it bolsters market resilience by offering vital alternative capital during systemic cyber events, ensuring stability and aiding recovery when traditional insurance markets may face capacity constraints.
As the cyber insurance market continues to grow, the demand for Cyber ILS is anticipated to rise, drawing more issuances from both new and existing participants. To effectively seize these opportunities, sponsors will need specialized expertise in cyber risk, securitization, and structuring.
