Stefan Holzberger, Chief Rating Officer at AM Best, has revealed that his company currently has three newco dedicated cyber insurers in the pipeline for initial rating.
The rating agency executive disclosed the imminent entrance of three new cyber entities to the market during an AM Best Reinsurance Market Briefing panel held at the RVS event in Monte Carlo today.
“There is some more interests coming,” Holzberger confirmed, when asked about a potential retraction of capacity within the cyber sector.
Senior analysts from AM Best were questioned by audience members on the state of the cyber re/insurance market, given the perception that many carriers have opted to drastically reduce cyber capacity and introduce stringent exclusions.
Catherine Thomas, Senior Director, Analytics, assured that this pull-back was necessary as the industry seeks to adapt to the changing protection needs of the market, even if that leaves gaps in coverage.
She noted that the COVID crisis highlighted starkly for re/insurers the importance of robust wordings, and the need for insurers on the primary side to gain more clarity on their cyber risks they are exposed to, in order to win the support of reinsurers, who can in turn secure capital markets backing.
“It is so important that there is clarity of cover,” Thomas told attendees at the briefing in Monaco. “It’s important so products can be priced properly. And it’s important for insurers to have an element of certainty as to what they’re covering in order for them to aggregate the risks.”
“There is then the concern that by just putting in exclusions, it leads to under-insurance and it leads to protection gaps,” she acknowledged. “And the industry does need to look at how it can cater for that. And given the recent loss experience in cyber there is a lot of caution in that market.
But I think what we are seeing is an immediate response in terms of pricing and tightening up cover. I think over time though what we will see is insurers deploying resources, looking at what systemic risks they’re exposed to, and how they can potentially manage that, for example, through the use of sub limits.”
Also on the panel was Angela Yeo, Senior Director, Analytics & Head of Operations at AM Best, who concurred that re/insurers do continue to view cyber as a very attractive risk, but may not yet have the insights to match their appetite when it comes to this class.
“I think that history is sort of repeating itself,” Yeo suggested. “If you think back to the 9/11 terrorism event, the initial reaction was to exclude, exclude, exclude. I think cyber in the near future will develop. It is an attractive risk for risk takers.”
“Companies – whether it’s direct or reinsurance companies – are building up their knowledge and their expertise in that market,” she continued. “So they will be happy to start underwriting that risk again. It will take a little bit of time, but certainly within the companies that I’m seeing, there is an appetite for it. It’s a cautious approach, but there is appetite for it.”
