One Article Review
| Source |  Kovrr |
|---|---|
| Identifiant | 8393607 |
| Date de publication | 2021-03-24 00:00:00 (vue: 2023-10-10 07:25:35) |
| Titre | Cyber ILS: Les gestionnaires ILS ILS à risque ILS suivant recherchent de nouvelles opportunités, le cyber-risque devrait être une considération clé pour étendre le marché ILS. Cyber ILS: The Next ILS Risk ClassAs ILS managers look for new opportunities, cyber risk should be a key consideration for expanding the ILS market.Read More |
| Texte | The Next ILS Risk ClassâInsurance linked securities (ILS) are an asset class comprised of catastrophe bonds, collateralized reinsurance instruments and other forms of risk-linked securitization. Their value is affected by an insured loss event .Insurance Linked Securities are currently dominated by natural catastrophe risk (Nat Cat). However, recent loss affected years have shown that a reliance on peak Nat Cat can lead to high percentage draw-downs and large volumes of trapped collateral. Similar returns to Nat Cat can be derived from other classes with similar characteristics. If blended with Nat Cat risk, they can be used to develop better diversified portfolios with lower exposure to any one event or class, which would also lower capital exposure to any one event, while producing similar gross returns and improved net returns in the long run. In order for investor performance to continue to develop in a positive trend, it is necessary for ILS managers to improve their risk profiles. As ILS managers look for new opportunities, cyber risk should be a key consideration for expanding the ILS market. In the whitepaper, Cyber Catastrophes Explained, cyber catastrophes are defined as: An infrequent cyber event that causes severe loss, injury, or property damage to a large population of cyber exposures.A cyber event that starts with a disruption in either a service provider or a technology, and unfolds by replicating this disruption whenever possible. Nat Cat has traditionally dominated the ILS market due to its inherent characteristics, including only deep tail correlation to financial markets and short tail of loss development. Additionally, the market boasts well developed and transparent third party pricing models and a wealth of availability of investor educational material. Nat Cat is favorable for the ILS market due to the substantial and growing need for capacity from (re)insurers and its consistent definition of risk and event. It has also proven itself in its positive risk and reward transaction metrics and is accessible due to the availability of transactions through the risk and reward profile from insurance, reinsurance and retrocession. In many ways cyber risk has many parallel characteristics to Nat Cat and therefore is an ideal peril to be incorporated in ILS portfolios. In the early days of the market there was less consistency in coverage and risk definition, and modelling agencies tended to provide only a âblack box,â leaving underwriters of the risk with little transparency into the methodology or numbers derived from the model. However, the cyber insurance market has rapidly matured, it is growing at 21.2% CAGR with substantial new wholesale capacity required to meet the demands of a growing consumer base across all geographies. Additionally, similarly to Nat Cat, cyber risk exhibits limited correlation with major global financial markets performance except in the deep tail. It should also be noted that cyber risk is a short tail class with clarity and standardization in the definition of risk covered. In order for the market to develop, third party models will need to provide a stable and transparent pricing methodology which can be simply implemented as the core of the underwriting process. The model will need to be effective at the insurance, reinsurance and retrocession levels, and provide accuracy and functionality across the range of data types (both aggregated and detailed data can be modeled). A modeling vendor must be transparent and provide the user with the ability to educate both themselves and their investors. Kovrr provides a stable and transparent pricing methodology which can be simply implemented at the core of the underwriting process. The model is effective at the insurance, reinsurance and retrocession levels, and has been developed to provide accuracy and functionality across the range of data types (Both aggregated and detailed data can be modelled)Quantifying risk frequencies in the cyber landsca |
| Envoyé | Oui |
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| Tags | Threat |
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| Notes | ★★★ |
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