Property Claim Services (PCS), a Verisk Analytics business, has announced the launch of a new data set to help cyber insurers and reinsurers optimise their capital and manage risk more effectively.
The first non-loss reporting offering from PCS, this platform will provide insight into the largest affirmative cyber risks in the global market.
Representing approximately a third of the global market, PCS Cyber RLM provides a consolidated view of insurance programs with at least $200 million in limit, as well as some smaller programs.
The product is already available for client use and is expected to inform cyber reinsurance decisions heading into the January 1 renewals this year.
“With the once rapid growth in the cyber re/insurance market effectively stalled, insurers are ceding large amounts of premium to reinsurance, and reinsurers have yet to gain access to a robust and reliable retrocession market,” said Tom Johansmeyer, Head of PCS.
“As a result, a somewhat limited capital base has become a constraint on expansion. Even before 2020, there were signs of a capacity crunch looming,” he explained.
“While COVID-19 and the year’s wave of ransomware attacks have certainly brought some challenges to the cyber insurance community, it was clear that structural issues in the market were already poised to limit the market’s potential.”
With an estimated 250 programs of at least $200 million and another approximately 500 programs of $100–199 million, PCS notes that a small number of companies now accounts for nearly half the industry’s global affirmative cyber premium.
As such, only a handful of losses from this cohort could fundamentally change the year’s industrywide loss ratio and have pricing implications for years to come, it warned.
“Three or four years ago, the market was concentrated enough that most of the larger players had a good sense of just about everything in the market. The growth that followed, however, resulted in a more fragmented view,” said Ted Gregory, Director of Global PCS Operations.
“As a result, more and more blind spots have emerged, making the development of a tool like PCS Cyber RLM crucial to understanding the broader market of one’s own book and loss experience. Our clients needed some help, and the entire PCS team is honored that the market has once again engaged PCS to get the job done.”
Alex Mican, Senior Product Development Director, also commented: “Cyber insurers cede hefty amounts of premium to reinsurers, which has led to constraints on reinsurance capital. Improved analytical capabilities—enabled, for example, by PCS Cyber RLM—should introduce more room for finesse. Instead of relying exclusively on blunt-force quota shares, more insight into the global market could open a wider range of risk-transfer alternatives.”
“The insurance-linked securities community has had its eye on cyber risk for a while, but lately has been concerned that they’d be assuming risk that nobody wants to hold,” added Johansmeyer. “It’s a fair concern, given how much premium is ceded out.”
“We believe that PCS Cyber RLM will help retrocession writers get more comfortable with cyber risk, and we see this data set becoming part of a broader analytics ecosystem among original insurers, possibly helping them write more cyber and retain more of what they write,” Johansmeyer concluded.
“Not only would that alleviate pressure on the global risk and capital supply chain, it would also help insurers manage their own books more effectively—to include retaining more profitable business.”