Coalition’s Ferian Re ‘brings new capacity from outside insurance’: Shawn Ram

Coalition’s head of insurance, Shawn Ram, said Ferian Re will allow the company to bring in new capital from outside the traditional insurance construct at a time when supply of capital is low.

Ferian Re is an independent Bermuda-based Class 3B reinsurer that will provide capacity across Coalition's cyber programs. 

It will will be capitalized with approximately $300m from an investor group led by funds managed by BDT Capital Partners, an affiliate of BDT & Company. Minority investors include The Pritzker Organization, among others.

“Over the past 18 months or so, there's been a compression of cyber capacity throughout the industry,” Ram told CyberInsurer.com. “This has led to increased scrutiny from reinsurance entities, increased pressure and, frankly, less of an opportunity to meet the growing demands of a digital economy and the growing needs of policyholders and brokers who are concerned about cyber risk throughout the industry.”

Ferian Re will participate in Coalition's cyber insurance programs alongside leading global insurers and reinsurers including Allianz Group, Arch Insurance North America, and Swiss Re Corporate Solutions.

"Coalition has pioneered a new model of risk management with Active Insurance, which has resulted in continued strong performance and market-leading loss ratios," said Dan Jester, president and co-chief investment officer of BDT Capital Partners.

Jester added: "With the formation of Ferian Re, we are excited to provide a tailor-made capital solution to support Coalition as it scales to be one of the largest cyber insurance providers globally. This investment reflects BDT's differentiated focus on providing patient capital to family- and founder-led companies to support their long-term success." 

Joshua Motta, founder and chief executive of Coalition, said: "The rapid growth of the cyber insurance industry has outpaced the supply of reinsurance capital. We're excited for Ferian Re to bring alternative capital to the market and introduce a reinsurer with deep expertise in cyber.”

At the most reinsurance industry get-together in Monte Carlo, at the beginning of September, the world’s leading reinsurers were all highly cautious on cyber. This has raised questions over where the capacity is going to come from to support the cyber line, of which about 50% is typically reinsured. 

Munich Re has the largest exposure to cyber at $1.4bn in annual premiums, a huge share of a market valued at around $10 bn overall. The company said it expects to lose market share as cyber continues to boom. Munich projects that the size of the market will double to €20bn in the next four years.

Swiss Re writes less than half as much, at about €600m in premiums, while Hannover Re said it expects to write between €550m and €600m this year. 

Swiss Re said it expects the cyber market to be as large as property insurance by 2040, a massive expansion if that forecast is correct. But the company also said prices would have to continue to rise before it would commit significantly more capital to the sector.

Hannover Re said it would keep its exposure to the sector broadly stable, part of a generally cautious approach across all lines of business at a time of high inflation, increasingly frequent natural disasters and geopolitical instability.