MONTE CARLO, Monaco — Reinsurers remain cautious about covering cyber liability risks but are optimistic that changes in the primary market will make the risk easier for them to assess and price.
Recent announcements by large commercial insurers, including Allianz SE, American International Group Inc. and Lloyd’s of London, that they will seek to reduce their exposure to so-called silent cyber risks by affirmatively including or excluding cyber risks from policies should provide more clarity for reinsurers, they say.
Cyber liability was again a significant discussion point during the RendezVous de Septembre in Monte Carlo last month. Reinsurers and brokers who attend the meeting have for the past several years spoken about the opportunity that reinsuring the burgeoning
cyber liability market presents for the international reinsurance market, but also warned that as an emerging risk it becomes more difficult to underwrite the further removed a reinsurer is from the primary risk.
“It’s very challenging because the product is very diverse, so once you package up all the clients and insureds you don’t necessarily know what’s in that bag of cyber risks … so there may be systemic issues that might impact a number of clients,” said Daniel Carr, chief innovation officer and cyber lead at Occam Underwriting Ltd. in London.
Occam writes cyber insurance and reinsurance, but about 85% of its cyber liability book is primary coverage, he said. Where it does write reinsurance “we have control over the terms and visibility into the risk,” he said.
The managing general agent will likely write more reinsurance next year and is also planning to offer an admitted cyber policy in the United States, which is its main market, in conjunction with a U.S. insurer, Mr. Carr said.
“To really get a large amount of capacity on the reinsurance side, we need a little bit more standardization,” said Albert Benchimol, president and CEO of Bermuda-based insurer and reinsurer Axis Capital Holdings Ltd.
Recent moves by commercial insurers to reduce silent cyber risks have been “a big move” for the market, he said.
“As the line matures, I think it will coalesce around some core structures and all of that will make it easier to create greater appetite on the reinsurance side,” Mr. Benchimol said.
The cyber market offers significant growth potential for insurers and reinsurers, said Moses Ojeisekhoba, CEO reinsurance at Swiss Re Ltd.
Cyber is a $5 billion market, but in three to four years it “will be closer to $14 billion,” he said. “Clearly the exposure is growing.”
“Cyber and technology-driven risk is really important, and I think it’s going to be a critical line or peril for the business and a great opportunity for the business,” said David Priebe, chairman of Guy Carpenter & Co. LLC in New York.
Primary insurers are trying to quantify and manage cyber exposures, he said.
“The reinsurance market is rallying behind that to see how they can support that,” Mr. Priebe said. “We’re working to develop capital and capacity for cyber risk within the reinsurance community and the broader capital markets.” (See related story.)
Paris-based reinsurer Scor SE wrote about €50 million ($55 million) in cyber coverage in the first half of 2019 — a fraction of its more than €8 billion in gross written premium — with about half the cyber premium derived from insurance and half from reinsurance, said Jean-Paul Conoscente, CEO of Scor Global P&C.
“Our risk appetite remains cautious for two reasons: one is that the risk assessment is still maturing,” he said. In addition, “non-affirmative silent cyber is still very present and hard to quantify.” Munich Re wrote about $473 million in cyber premium in 2018, which was evenly divided between primary and reinsurance business, said Torsten Jeworrek, chairman of Munich Reinsurance Co.’s reinsurance committee based in Munich.
The German reinsurer reported more than $34 billion in reinsurance premium last year.
“What we need is an effort by our industry to make clear what is covered and what is covered where,” Mr. Jeworrek said.
