Novelty Premium in Cyber Cat Bonds Has Reduced, but Not Completely ‘Gone Away’: AM Best

Why It Matters

Lower loss multiples signal maturing pricing but the still‑elevated premiums highlight limited market depth, affecting investors and insurers seeking cyber risk transfer.

Key Takeaways

• Beazley’s $300 million bond is the largest cyber cat bond issued so far
• Chubb’s $150 million bond is the first aggregate 144A cyber cat bond
• Loss multiples dropped to 5‑8.5, down from 10‑11 in 2024
• Cyber‑ILS capacity rose to $1.235 billion, up from $785 million in 2024
• Modest issuance expected until cyber insurance uptake expands

Pulse Analysis

The cyber catastrophe‑bond market is still in its infancy, but recent data suggest it is moving beyond the early‑stage novelty premium that initially inflated pricing. AM Best’s latest report shows that while loss multiples have fallen, they remain well above the property cat‑bond average of 2.97, indicating investors still demand a risk premium for the relatively untested cyber exposure. This shift reflects both improved transparency from sponsors and a gradual learning curve among investors about cyber loss modeling.

Beazley and Chubb have become the market’s flag‑bearers, together accounting for roughly $450 million of the $1.235 billion 144A capacity at the end of 2025. Beazley’s three‑tranche $300 million issuance and Chubb’s pioneering $150 million aggregate bond illustrate how larger sponsors are experimenting with structure and pricing. The drop in loss multiples—from double‑digit figures in 2024 to the 5‑8.5 range—suggests that the novelty premium is receding, yet the numbers remain higher than traditional lines, underscoring lingering uncertainty around cyber loss severity and frequency.

Looking ahead, abundant primary and reinsurance capacity is offset by muted demand, as cyber insurance remains largely voluntary and many firms lack a clear view of their exposure. Consequently, AM Best expects cyber‑ILS issuance to stay modest until the underlying insurance market achieves scale. Pioneering insurers are nonetheless optimistic, betting that broader adoption of cyber coverage and continued data sharing will eventually lower premiums and unlock more robust capital‑raising opportunities for the sector.