There’s been notable concern across the global insurance and reinsurance industry of London’s ability to maintain its position as an international re/insurance hub in an increasingly competitive and post-Brexit world, but could the cyber reinsurance market be the perfect opportunity for London to embrace?
Discussing the growing threat of cyber in relation to the London and broader reinsurance industry Patrick Bousfield, part of the cyber reinsurance team at specialist reinsurance broker Capsicum Re, suggests that cyber could be the opportunity for London to remain a leader in market innovation.
“There is an opportunity for the London market to continue to be at the forefront of innovation – cyber is that opportunity,” says Bousfield, in a recent note on the Capsicum Re website.
Bousfield notes the very challenging insurance and reinsurance industry operating landscape, where combined ratios are creeping above 100%, reserves are dwindling and job losses are mounting in response to overcapacity, declining rates and higher expenses.
However, the growing and inherently complex cyber re/insurance space is “defying these macro trends,” says Bousfield, being put back firmly on the agenda of most businesses following the recent WannaCry ransomware attack that impacted 150 countries and caused an estimated economic loss of $8 billion.
The attack, combined with new cyber security regulation in parts of the world is driving up demand for cyber coverage, and owing to a lack of sufficient capacity in the primary market the international reinsurance market can enter to provide “genuine benefit to the marketplace,” feels Bousfield.
“This is undoubtedly the greatest opportunity for a risk-taking industry to demonstrate why the London market is the market of choice for specialist insurance and reinsurance risk throughout the world,” says Bousfield, continuing to explain that the broker has seen numerous reinsurers enter the cyber space recently, a trend expected to persist.
The London market has a history of being innovative and as the city’s position as a global specialist re/insurance hub comes under increasing threat from a number of macro trends, its ability to develop innovative cyber solutions could be of great importance both now and in the future.
Cyber solutions are being developed all the time, and attacks like WannaCry, while potentially crippling for some, will help re/insurers and risk modellers to better understand the exposure, ultimately resulting in more effective and affordable cyber solutions.
“Reinsurance capacity will continue to play a vital role in enabling the market to grow and Capsicum Re will continue to encourage engagement from those who are currently unconvinced and drive greater investment into this growing class,” concludes Bousfield.