According to Pascal Millaire, Chief Executive Officer of cyber risk analytics specialist, CyberCube, the gap between the best-performing cyber insurers and the worst-performing are expected to widen in 2022.
In a series of predictions from CyberCube, Millaire said that the spread between the loss ratios of top quintile carriers and bottom quintile carriers will widen.
Millaire noted: “Those cyber insurers who exited 2021 with more of a ‘business as usual’ mindset will not be as well-positioned as those who exited 2021 with a call to action to dramatically improve underwriting standards. There will be a greater spread between high and low-performing carriers from a loss ratio perspective in 2022.
“In 2021, many carriers doubled down on more rigorous underwriting standards, increased use of data-driven underwriting tools and instituted disciplined underwriting strategies that resulted in them walking away from unattractive accounts. This approach will pay dividends over the coming year.”
According to Millaire and other CyberCube experts, next year will also see alternative capital providing more capacity for the cyber insurance market.
Rebecca Bole, CyberCube’s Head of Industry Engagement, argued that there is the potential for the development of a cyber insurance-linked securities (ILS) market in 2022 to alleviate the catastrophic financial impact of cyber-related events.
Michael Millette, Managing Partner at Hudson Structured Capital Management Ltd., and board director at CyberCube, said: “There’s currently a capacity crunch for cyber insurance, be that on an individual risk basis or on a portfolio level.
“In order for the industry to reach its long-term growth projections, there’s a hypothesis that we’re going to need more capital available to take on this risk than is currently available within the insurance and reinsurance markets.
“The capital that we need is a combination of capital for “regular” cyber and for “cyber cat”. The industry is doing a good job forming capital for regular cyber – companies are entering the cyber space and we’ve seen a rapid expansion of Managing General Agents (MGAs) and skilled modelling firms. That collective can bear the current level of cyber premiums.
“We’ve seen a series of fairly small and experimental placements of cyber retro in the capital markets, maybe totalling a few hundred million dollars. That will grow with time.”
