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Cyberrisk will make its way to the insurance-linked securities market "sooner than later," according to Paul Schultz, CEO of broking group Aon PLC's investment banking division, Aon Securities.
A number of hurdles exist to the transfer of cyberrisk to the insurance-linked securities, or ILS, market, such as the relative lack of sophistication of cyberrisk models and the potential for cyber losses to be correlated with other risks in investors' portfolios. But speaking to S&P Global Market Intelligence at the reinsurance Rendez-vous in Monte Carlo, Schultz said: "I think we're closer."
He suggested that the development of cyber ILS could be similar to how property catastrophe ILS, which form the bulk of the market, evolved. In the early days of ILS, the bonds' payouts were triggered by factors such as the magnitude of the event, or an industry loss index, rather than the actual claims experience of the company protected by the...