The new product has been designed to protect the cedent from the impacts of catastrophic cyber market losses
Aon has joined forces with Hudson Structured Capital Management to launch a new cyber risk transfer product that offers up to $70m of alternative capital for protecting insurers and reinsurers from systemic and catastrophic cyber events.
Hudson Structured Capital Management operates its re/insurance business as HSCM Bermuda, which is an asset manager engaged in investing in the re/insurance and transportation sectors.
Aon and HSCM Bermuda have completed the first transaction, which is a retrocession contract on behalf of an undisclosed cedent.
HSCM Bermuda partner and chief underwriting officer Edouard von Herberstein said: “We are excited to help cedents transfer their cyber risk through this innovative and ILS-friendly structure with Aon.
“This is a great example of insurance and ILS markets offering risk transfer solutions for intangible assets, an area of the market where we expect to see a growing number of opportunities in the years to come.”
Aon said that the cover of the new product will protect against increasing cyber loss aggregations on the balance sheets of re/insurers.
The new product will shield the cedent from the impacts of catastrophic cyber market losses resulting from self-propagating malware or wiperware, a major cloud outage or certificate revocation, or distributed denial of service, said the professional services firm.
Aon reinsurance solutions cyber international head Luke Foord-Kelcey said: “In addition to increased claims activity in the cyber market, the current global crisis has emphasised the need for re/insurers to protect for systemic events. We are enabling carriers to navigate new forms of volatility by expanding the cyber reinsurance and retro markets to address this risk’s inherent systemic exposures.
“Our methodology allows us to develop event definitions that achieve clarity and confidence for all parties.”
Aon, which is domiciled in Ireland, provides risk, retirement and health solutions. The company signed a $30bn merger deal with Willis Towers Watson in March 2020 in a move to create the largest insurance broker in the world.