Global reinsurance firm Hannover Re has introduced Cumulus Re, the “first-ever” catastrophe bond to cover losses that arise from a sustained cloud outage.
With a value of US$13.75 million, the bond, issued by Hannover Re’s owned reinsurer Kaith Re, aims to provide the firm with incremental retrocession protection.
This protection is triggered if specific cloud services in designated US cloud regions are interrupted for longer than a set waiting period, as detailed in the terms of the bond.
Parametrix acts as a modelling and calculation agent for the annual bonds, creating the cloud model based on historical cloud outage data.
Henning Ludolphs, managing director of retrocession and capital markets at Hannover Re, says: “Cloud outage is one of the main risks within cyber (re)insurance and the involvement of capital markets is crucial to satisfying capacity needs in the mid to long term.
“This cover is a first step towards getting investors involved, and we envisage growing the cover over time together with our investors.”
Sharon Haran, chief commercial officer at Parametrix, states: “To ensure the stability and sustainability of the fast-growing cyber insurance market, it is important to manage systemic risk effectively, which demands large capital resources.
“This is essential for both (re)insurers and investors as cloud outage is a major concern and therefore constitutes the primary coverage trigger.”
