It’s when there’s relative stability across the property & casualty (P&C) reinsurance landscape that specialty gets its well-earned moment in the sun. And with the weather likely to dominate P&C conversations at the 2024 Baden-Baden Reinsurance Meeting, growth opportunities are in vogue, noted Chris Baddeley (pictured left), VP of insurance solutions at Envelop Risk, and cyber is very much part of that conversation.
He noted that as a monoline specialty cyber reinsurance underwriting firm, serving the market since 2018, Envelop has enjoyed a front-row view of the changing nature of conversations about cyber reinsurance. He highlighted that when Envelop first went to Baden-Baden three years ago, cyber was an “alternative” topic of conversation in meetings – for some, a welcome break from discussions on property and casualty. Fast forward to today, with a back-to-back schedule of meetings with risk carriers looking to move into cyber for the first time, or established players looking to expand their existing portfolio or geographic footprint, cyber is now front and centre of attention.
Despite the rapid growth of both cyber risk and the cyber re/insurance market generally, the last two years have been relatively quiet, with pockets of the market where growth has been markedly tempered, he said. The theme from the 1/1 renewal conversations Envelop is starting to have, and going into Baden-Baden, is that growth is firmly back on the agenda, but in a much more focused way than before.
“So, rather than a catch-all phrase of ‘growth in cyber’, the market is taking a much more nuanced and targeted approach,” he said. “Many carriers are looking at geographies, customer segments, distribution models and other specific niches within the market for that growth potential. And that’s in a manner that we, as a team, don’t feel we’ve seen before. Whether that’s European growth, or Asia, or middle market, or alternative distribution – those are some of the themes we’re seeing emerging as focal points.”
It's conferences such as the Baden-Baden meeting that help to open up discussions about Europe and other regions as a marketplace, he said, and how re/insurance players can help it reach its full potential, given how limited the global penetration rate of cyber remains. “However, I think while new-opportunities will be a key theme of conversation,” he said, “it’s also important that people don’t forget about what’s happening back within their existing portfolios. And this year has been a good reminder of that.”
“Because, while this is an exciting class of business, and there are huge runways of opportunity in emerging markets and other parts of the ecosystem, losses can still happen. Big losses can happen and cat events in one form or another can happen. We're keen to make sure that people don't lose sight of their core portfolio’s exposures while they go on these new growth journeys within their business.”
Simon Welton (pictured right), EVP at Envelop Risk, affirmed Baddeley’s conviction that looking forward to the future while making sure the house is in order will be top of the agenda at Baden-Baden this year. Another element of the cyber evolution that fascinates him, he said, is how it has grown from zero to a mature business line in such a short space of time.
There are so many parallels between the growth of cyber, and the property & casualty market, and even other specialty lines including terrorism, he said. But for it to have gone from being non-existent to where it stands today in terms of developing modeling techniques, and now ILS and other financial instruments has been extraordinary. “And the journey inbetween, which followed the quite a traditional path of quota share being the best way to do it, and then excess-of-loss and then event excess of loss, has just been super accelerated.
“That’s probably because, as an industry, we’ve learnt the lessons of multiple other lines of business but even so, you have to consider that we weren’t really able to look backwards when cyber was first being developed. You can go back through 1,000s of years of earthquake history, 100s for hurricane history, and even in liability lines you can look back over many years of litigation records. These didn’t exist for cyber and so we have built a massive ecosystem around this dynamic threat in a short space of time, which is enormously positive.”
