Underwriting discipline key for cyber insurance market: Executives

PHILADELPHIA —  Underwriting discipline must persist in the commercial cyber insurance market as the frequency and severity of losses rise, according to insurance industry executives who spoke Tuesday at the 2024 NetDiligence annual cyber summit in Philadelphia.

Meanwhile, cyber pricing and rates have softened and remain favorable to buyers.

Longer term, executives see the market continuing to grow but say it will require fuel in the form of capital to do so.

Current market pricing is sustainable, “but deterioration of underwriting discipline and market conditions is starting to show in some really concerning areas,” such as the large account space, said Jeff Kulikowski, New York-based executive vice president, professional lines, for Westfield Specialty, a unit of Westfield Insurance Co.

Mr. Kulikowski said insurers are putting out bigger limits at lower price points as the loss environment worsens from a frequency and severity point of view.

Larger and more frequent events could hinder the sector’s profitability, the executives said.

“There’s a little bit of uncertainty that could sort of tip some of these carriers from a profitable territory into an unprofitable territory,” said Killian Brady, New York-based chief underwriting officer for Resilience Inc. “It doesn’t take much for us to start to get close to that unprofitable territory.”

Commercial cyber insurance buyers are also taking steps to make pricing sustainable.

Some are turning to structured programs in an attempt to avoid any substantial single-year volatility in pricing, said Matt Chmel, Chicago-based chief broking officer of Aon PLC’s cyber solutions group.

“This year, I’ve seen more of us than ever put longer-term and multiyear deals in place,” Mr. Chmel said.

Simon Shreeve, Roseland, New Jersey-based director, client account management, for CyberCube LLC, sees growth for the cyber market but says it will require further capital commitments from insurers, reinsurers and others.

“There’s so much opportunity still in the market. The other piece to think about is how much capital is required from a long-term perspective. So, there’s definitely a capital requirement to sustain that growth.” Mr. Shreeve said.

“I think we need new capacity in certain areas,” Mr. Chmel said, noting that in the small and medium enterprise space there is “plenty” of capacity.

“There are still a number of Fortune 250 buyers that don’t purchase coverage because they don’t feel there’s enough limit there,” he said.