Hannover Re taps capital markets for cyber coverage

Hannover Reinsurance SE said Thursday it has purchased $100 million in retrocessional reinsurance coverage for cyber exposures through a proportional reinsurance treaty with a capital markets provider.

The coverage, which is placed with funds managed by New York-based Stone Ridge Asset Management LLC, supports Hannover Re’s worldwide cyber portfolio, the Hanover, Germany-based reinsurer said in a statement.

“For the first time, we were able to transfer cyber risks to the capital markets, and on a substantial scale, through a proportional reinsurance solution,” said Silke Sehm, a member of the reinsurer’s executive board.

Retrocessional coverage provides reinsurers with reinsurance for their own portfolios.

Hannover Re is the world’s third-largest reinsurer and a longtime participant in the insurance-linked securities market. Historically, capital markets participating in the reinsurance market have focused on property catastrophe risks and life reinsurance.

In the statement, Ross Stevens, CEO of Stone Ridge, said the company expects higher than average investment returns from cyber insurance investments and low correlation with other investment risks.

“We intend to meaningfully grow our cyber exposure throughout 2023 and beyond,” he said.

Earlier this month, Beazley PLC announced it had purchased a catastrophe bond offering $45 million in cyber risk coverage.

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