Jeremy Gittler, practice leader and head of Cyber Americas at AXA XL, sees the cyber insurance industry as a roller coaster. He said that after a tumultuous few years with the advent of more sophisticated ransomware, the market is slowly recovering, but that doesn’t mean insurers should let their guard down.
“It was a wild ride or a swinging pendulum. So if you think of it as a ride, then I think of a roller coaster,” he said. “People are starting to get more comfortable with[the network]and so at this point, you now have this massive inflow into the capacity market…Everybody is happy back about it. What I’ve seen recently – and I find this a bit unsettling – is perhaps a bit complacent in regards to everyone wanting to develop their book, but are they underwriting it? the way they did a year and a half ago?”
He urged underwriters to continue to raise prices online but to move forward cautiously.
“We can’t be in a situation where we really think everything is going to be fine,” he said. “This is not over yet. It can’t.”
Gittler spoke in a panel of experts at the PLUS 2023 Network Symposium held last month in New York City. Experts agree that one reason cyber risk is so difficult to manage for insurers is the level of uncertainty in the space.
“Spreading events are certainly real…but the extent to which they can happen and the extent of damage they can cause is really a mystery,” says Jason Glasgow, network lead at Allied World. know, note that this uncertainty is more apparent in the network. than any other line. “And it’s hard to value your competence based on that uncertainty.”
He said: “While it may not be possible to remove all uncertainty from the cyber market, if insurers focus on becoming experts in the field, they can arm themselves with as much data and knowledge as possible to further underwrite and value risks rather than eliminate coverage.
“I think you insure what you should insure and you price that exposure the way you know it rather than giving out coverage because you’re not sure about it,” he said. “I think we need more data in terms of modeling and more expertise. You want the decision makers on this to be real experts in the field.”
Partnerships and risk reduction
Much of this learning can come from better partnerships between insurers and their insureds, says Liz Geary, president of insurance solutions at Liberty Mutual.
“There is really a partnership to reduce risk together, and I think that makes for better risk,” she said. “And it makes us more comfortable with risk.”
She added that the relationship between clients and insurers is changing as customer requirements continue to expand, going beyond risk transfer to require more insurers.
“I think the amount of work that we do for them has actually increased quite a bit,” she said. “It’s a very dynamic risk environment, so you’re only as good as your current information, and you have to constantly change and constantly have this feedback with your customers to make sure they’re moving forward. many of your suggestions.”
Glasgow agrees, adding that an ongoing dialogue between the insurer and the insured is required in a changing risk environment.
“There needs to be that back and forth because, especially in the SME sector, maybe in the middle market… the candidates want that relationship with the insurance company,” he said. their danger”. “They really need that relationship.”
This means carriers will need to work with the insured on all parts of an insurance policy, he said, from risk management to claims servicing, as well as insurance claims. offers vendors or tools to help them speed up network security.
“Of course, your insurance policy itself will help pay for problems that arise,” he says. “Companies need to see that that’s the partnership you’re looking for, so it’s not just a matter of ‘Do I buy a policy for $30,000?’ It was, ‘Can I get a partner for $30,000?’”
All of this will help with remediation and recovery as cyberattacks become more frequent, especially given the increasing severity of ransomware, says Gittler.
“We know companies will be affected. The question is how quickly you get back up and running,” he said. “And that’s why ransomware is so troublesome, because even if you’ve paid the ransom, it can still take a week or two before you’re back up and running, or more.”
If the ransom is not paid, recovery times can be even longer and increase the cost of business disruption, as well as data recovery, forensics, legal, and ultimately the ransom payment itself. The solution, he said, is for both insurers and insureds to be alert to underwriting and cybersecurity controls.
“As long as the companies continue to do that, and have a combination of solid underwriting and tight control of our insureds, then I think we are on the way,” he said. in a great location.
Ask the right question
Geary says that in order to maintain this partnership, it is important for insurers to ask even more specific questions of their insureds. This will allow insurers to understand the business disruption impact of customers should an incident occur.
“I foresee a situation where underwriters might ask customers, ‘Okay, who are your most trusted suppliers? And what will be the impact of business disruption if something goes wrong?’” she said. “We don’t ask those kinds of questions anymore, and I think if we do then we’ll be able to better understand the implications of disruption.”
She went on to say that it’s not enough to ask customers what their cybersecurity provider is, but underwriters will need to find out the specific impact on the customer’s business, including including third-party providers, in the event of a network problem.
“I think we ask a lot of modeling agencies without a lot of information, and so I think that’s another way to think about it. Be really specific with what types of providers you need coverage,” she says. “I think the underwriting could be there. Not right now.”
While there are some needed network underwriting improvements, according to panelists, the market is attracting new buyers. In fact, Glasgow says some of this may be due to increased partnerships with customers and insurers.
“Even in the toughest part of the cyber market over the past few years, there is still demand for new buyers and there will be more new buyers entering the market,” he said. “There is a limit to how much people will pay (for network coverage) and we have seen some of those limits on a larger scale, but I think the partnership and delivery of the services that we If it continues, there will be new buyers in the market.”