Patrick Tiernan, Chief of Markets at Lloyd’s, says the insurance and reinsurance marketplace has a duty to provide leadership in the cyber market and ensure sustainable underwriting practices.
With the cyber market set to continue it’s rapid growth, it is “encumbent on Lloyd’s to be a leader in this space,” Tiernan said during a recent Lloyd’s Q1 market update.
Lloyd’s is poised to report a better than expected combined ratio of 91.9% for full year 2022, although an investment loss of £3 billion is expected to result in a full year loss before tax.
Analysts at S&P have noted that Lloyd’s strong year-end 2022 underwriting results reflects its focus on underwriting controls and positive price increases, and expect it to continue its profitable underwriting momentum in 2023.
Addressing Lloyd’s participants in the market update, Tiernan spoke to cyber as one potentially promising area of growth for Lloyd’s, which currently represents its fastest growing L60 class, with Lloyd’s now writing around 20% of the global cyber market premium.
“Our long term expectation for the class is that the growth will continue as product penetration increases, particularly outside of the US,” Tiernan noted.
In line with its goals to expand further in cyber, Tiernan explained that Lloyd’s has begun a “pre mortem” to focus on the operational and commercial aspects of how the market would respond to a major cyber event.
“Our base theory is that mutualization of the risk will be helped by having an accessible, affordable, contract certain products that are capitalised for the risks that they’re designed to cover,” he said, adding that Lloyd’s maintains an “unflinching commitment” to its requirements of clarity of coverage for catastrophic nation state-backed cyber-attacks, which come into effect from March 31st.
“We are not indifferent to the customer impact and we’re not running away from this risk. Lloyd’s are not mandating any wordings. Rather, we are insisting on clarity and assurance that these risks are structured and priced appropriately, and that aggregations are understood,” Tiernan said.
“Now should be a time to put energy into developing new products and propositions to respond to this change,” he continued.
“We are continually monitoring systemic risk in the market, and we have been steadfast in our directive to ensure you understand where such risk exists in your portfolio, so that it can be underwritten and priced appropriately or otherwise removed.”
“Demand for more complex covers and layers can be structured as required for more sophisticated markets. Ultimately, we want to be able to support that demand growth and retain our leadership position.”
In other comments from the Q1 market update, Tiernan noted that Lloyd’s is seeing an uptick in reinsurance submissions as syndicates and participants work through the impacts of the January renewals.
