In a groundbreaking venture into the financial aspects of cybersecurity, Parametrix, a front-runner in cloud monitoring and insurance, and Hannover Re, a leading global reinsurer, debuted the first-ever Cumulus Re catastrophe bond. Valued at $13.75 million, this bond is specifically designed to mitigate losses due to prolonged cloud service outages. This is an increasingly critical risk in today’s digital business environment.
Issued by Hannover Re’s Bermuda-based subsidiary Kaith Re Ltd., Cumulus Re provides incremental retrocession protection against specific cloud service disruptions in designated U.S. regions covered by selected cloud service providers. This parametric “cat bond lite,” a privately issued product under Regulation 4(a)(2), has attracted multiple investors keen on this novel form of reinsurance.
Introducing such financial instruments is a direct response to the heightened dependency of businesses on cloud services for essential storage and processing tasks, which has significantly increased their exposure to service disruptions. Henning Ludolphs, Managing Director at Hannover Re, stressed the critical nature of this development. “Cloud outages represent a significant risk of business interruption losses, not just for the insured but across the insurance market,” Ludolphs explained. “This bond is an essential step toward bringing investors on board to address one of the most pressing risks in the cyber insurance arena.”
“Manage Systemic Risks”
Sharon Haran, Chief Commercial Officer at Parametrix, pointed out the strategic importance of this initiative. “To maintain the stability and long-term viability of the rapidly expanding cyber insurance market, it’s crucial to effectively manage systemic risks,” Haran said. “This requires substantial capital resources, making our efforts here vital for both insurers and investors.”
Parametrix’s role extends beyond just issuing bonds; it also involves sophisticated risk modeling and monitoring based on a unique cloud model developed from extensive outage data. Jonathan Hatzor, CEO and Co-Founder of Parametrix spoke about the company’s commitment to supporting the digital supply chain. “Our technology and data analysis capabilities have garnered trust and investment, crucial for addressing the complex risks of today’s digital landscape,” Hatzor noted. “Expanding our services to help all businesses manage these risks is a priority, and we are committed to the sustainable growth of the cyber insurance market through our expertise.”
The catastrophe bond represents a financial solution that highlights the intersection of technology and finance in addressing the challenges of digital transformation. It suggests a growing trend of innovative risk management solutions in the insurance industry.
Source: First-Ever Cloud Outage Catastrophe Bond Issued.
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