A security transferring systemic cyber risk to the capital markets, whose structuring runs into the absence of a stationary model and of uncorrelatedness.
A cyber catastrophe bond applies the proven cat-bond mechanics to cyber risk, a dedicated vehicle issues notes, holds collateral and repays on a trigger. Its difficulty is that cyber has neither a stationary physical model, the technical environment rewriting itself every five years, nor the uncorrelatedness with markets that gives the asset class its value, since a systemic cyber catastrophe also strikes the markets themselves. To date the market rests almost entirely on a single sponsor and remains a proof of concept.
The largest issuance to date, $300m in December 2025, rests on an indemnity trigger on a per-occurrence basis, applied to a peril with no natural occurrence.
cyber cat bond, cat bond cyber