There is a huge growth potential for the cyber insurance market, and more could be unlocked if re/insurers worked on a number of points to improve it, Rebecca Bole, CyberCube’s Head of Industry Engagement, suggested at AM Best’s “Europe Insurance Market & Methodology Briefings”.
Bole said: “I think that for future growth, there are three buckets across the value chain re/insurers could work on to unlock the cyber insurance market potential. As you know, cyber risk is such a transformative risk for society, so we need to kind of work on this.”
Bole’s first point is to work on capacity, especially reinsurance capacity. She recognized that there is significant capacity coming from certain porters, yet there is still a need for more of it.
She said: “One way that we see as unlocking that capacity, is to actually quantify that risk and draw parameters around what that risk might look like, so model the catastrophic potential of that. And once you have that, you of course can set cat loads, you can transfer that risk with a common currency of that quantification, and more reinsurers can provide capacity with confidence in their downside.”
The second stream according to Bole is that coverage needs to be fit for purpose as well as to increase penetration rates, making sure that those insured feel they are being provided cover with clarity and transparency. Bole notes that coverage certainty increases their confidence levels and improves product relevance, resulting in more sales.
The third point relates to an increase of talent in the business as well as arming brokers with the necessary tools to communicate with the insured and increase their confidence level.
Bole said: “We’re seeing an increase of talent in the business as well. Equipping brokers with tools, to speak the right language to the right people in organizations and arming them with the confidence to have discussions around cyber insurance risk transfer is important.”
She added: “I think a combination of those three drive demand, help to convert that demand into direct insurance purchase and then unlock that reinsurance market as well.
Valeria Ermakova, Associate Director at AM Best, highlighted the importance of improving contract clarity as well as standardization to boost cyber growth, agreeing with one of Bole’s points.
Another important point to improve according to Ermakova is data, mainly the quality of it and transparency in terms of how companies disclose their cyber exposure and cyber performance.
She said: “I think we have some really good data in the US. Because of ANIC supplement companies have to complete data on cyber so we can clearly see performance, loss ratios for standalone cyber, see the split of premiums.
“Outside the US it depends how companies disclose their cyber data. Some companies who have significant exposure, they started to separate out cyber, so it’s great to see that transparency. Other companies might be losing cyber into financial lines, liability and other classes. So they would have less transparency in terms of incurred losses, exact premiums for example.”
She added: “Internally some companies do keep a close eye on that and they would disclose it to us. But I think as the market grows and reaches those billions of dollars, there will definitely be more need for increased transparency, and stakeholders would like that.”