Lockton Re has executed what it believes to be the first dual-trigger industry loss warranty (ILW). The structure combines property catastrophe and cyber risk triggers within a single limit.
The transaction uses two independently reported industry loss indices. PERILS AG, working in collaboration with CyberAcuView, acted as the index provider for the cyber component. Verisk's PCS provided the industry loss index for the property catastrophe exposure.
The placement was designed for global cedants seeking capital-efficient ways to reduce their growing US cyber exposures. Rather than running separate transactions for each peril, a single dual-trigger ILW gives cedants access to protection across both lines through one transparent mechanism. Trigger determinations are based on reported industry losses rather than indemnity claims.
The cyber trigger draws on the US Cyber Industry Loss Index, launched by PERILS and CyberAcuView in September 2023. The index covers US primary cyber market losses from systemic incidents exceeding US$500 million. Loss data is collected from US cyber insurers, with calculations jointly signed off by both organisations.
Investor engagement with the index has grown since launch. Basis risk concerns persist in the absence of a major cyber catastrophe event. The index expanded its scope in October 2024 to cover unintentional as well as malicious cyber events, following market consultation.
Tom Parcell, chief broking officer of Lockton Re Bermuda, said the deal came in response to growing client demand for structures that combine risk types. "As the ILW market continues to evolve, we are seeing broader demand from clients for risk solutions that look at new structures and integrated options," Parcell said.
The ILW market contracted in 2025, with limit transacted falling by 10% to 15% to approximately US$6 billion, according to Howden Re. The broker projected a return to growth in 2026 as cedants recalibrate purchasing strategies. PERILS separately reported that ILW issuances using its indices reached a 10-year high in year-to-date 2025, at just under US$900 million of total limit. (AC)
Theo Norris, international ILS and cyber ILS leader at Lockton Re Capital Markets, said the deal pointed to wider convergence between the two peril classes. "This deal highlights trends we are seeing with the convergence of property catastrophe and cyber risk transfer, the growing maturity of industry cyber loss indices, and the development of new capital solutions for the market," Norris said.
Alternative risk transfer mechanisms, including cyber ILS and ILWs, are expected to grow as a share of cyber reinsurance structures. Lockton Re Capital Markets is working on catastrophe bonds combining property with other lines of business, including cyber, across multiple tranches. (AC)
The firm expects further growth in hybrid ILW, collateralised reinsurance, and catastrophe bond solutions as cyber loss reporting continues to mature.
