Hiscox has launched the first ever cyber industry loss warranty (ILW) product in a bid to address uncertainty around cyber tail risk.

Hiscox said that the new product responds to an accumulation of cyber losses throughout the year, adding that it can act as an effective hedging tool for underwriters of cyber risks. The Lloyd’s carrier said that ILWs are common in the property reinsurance and retrocession markets, but states that its new solution is the first that responds specifically to cyber losses.

ILW structures enable organisations to obtain coverage based on the total insured loss of an industry, rather than the losses of an individual insurer. The size of the market loss will be determined by the PCS Global Cyber Index.

Commenting on the launch Hiscox Re & ILS CEO Mike Krefta said: “We have big ambitions in cyber and our new cyber ILW is another important step forward in developing that market. We believe innovations like this demonstrate our technical abilities and willingness to be a market leader in emerging risks.”

Co-Head of PCS, Tom Johansmeyer remarked: “We’re excited to work with the Hiscox team to make cyber risk more accessible via the ILW market. Based on the loss activity reported last year through the PCS Global Cyber Index, we identified some key advantages to ILW trading over traditional approaches, particularly potential settlement speed for aggregate ILWs based on the PCS reporting process. For the next few years in particular, the ILW market could provide unique opportunities.”