Cyber insurance has seen its share of ups and downs in the past few years. As the market settles down, brokers must look toward helping achieve long-term profitability and sustainability.
“As brokers, we did a very good job at keeping rates reasonable for our clients for several years,” said Jonathan Weekes (pictured), senior vice president, cyber practice leader at Hub International Canada.
“We've seen the market correction that's occurred, so we need to be careful about driving rates back down to the point where it's no longer sustainable.”
Weekes is among a panel of speakers at Specialty Insurance Summit in Toronto this week (April 27). The panel, about “mastering” cyber risk insurance, aims to break down current cyber trends and help brokers get a leg up in this developing sector.
“While it is our job to get the most competitive pricing for the best coverage for our clients, we also need to be mindful of maintaining a stable and sustainable cyber insurance market,” said Weekes.
“A lot of that comes out of discussions with clients around what is a reasonable rate and what should they be paying and helping them quantify how much risk to retain versus transfer out to the cyber insurance market.”
Weekes began in the broker side of insurance 14 years ago, working in small businesses before moving into professional liability.
“We ensure they're educated and prepared to address those risks within their organization,” he told Insurance Business. “More broadly, it's our job as cyber insurance brokers to support our clients in managing cyber risk overall.”
Weekes described the current cyber risk and insurance landscape in one word: evolving.
“We've been dealing with an incredibly difficult cyber insurance market and we're now seeing signs of stabilization. While I think there's a long way to go for cyber as an insurable exposure, I think we're really at the beginning here,” Weekes said.
The Hub International Canada leader believes cyber will continue to evolve and change insurance underwriting over the next several years, as the industry understands risks better.
“Being a newer line of insurance, cyber doesn't have the history you would find with property or casualty insurance, where there's as much actuarial data or experience to drive pricing in one direction or the other,” he said.
A period of significant pricing swings has made the cyber market more challenging to navigate. But rate stabilization is now working its way through.
“We're not seeing 200% increases like we were over the past couple of years. We're now seeing increases anywhere from flat or no increase up to maybe 20% or 30%,” said Weekes.
“I do think a lot of that can be attributed to the fact that there's a lot more work going into underwriting cyber now. Clients are required to be a more diligent in their cybersecurity posture and hygiene, which means that more of the inherent risk is being addressed before they look to transfer out that residual risk to insurance.”
Though rates are stabilizing, and capacity is freeing up, Weekes stressed that ongoing education is important for businesses to stay ahead of bad actors.
Ransomware, business email compromise, and social engineering fraud remain among the most significant cyber threats in the current landscape.
“Something we saw popping up a little bit more in the past year-and-a-half to two years is bad actors targeting third-party providers like software as a service (SaaS) providers,” Weekes said.
“By attacking one of them, it potentially gives cyber criminals access to thousands if not hundreds of thousands of customers, opening up a broader attack surface and ultimately impacting more people.”
With cyber threats and technology still advancing at a rapid pace, the number of cyber insurance products will continue to expand to meet demand.
Apart from innovation, Weekes foresees the market evolving further in two ways:
“We’re seeing more carriers starting to use external scanning tools and providing clients with specific resources and controls to better prepare them,” said Weekes.
“On the other hand, underwriters will also become more involved in discussions with the broker and the client to make sure there’s a clear understanding of their expectations and to build up broader relationships.”
Want to more insights into the cyber market? The Specialty Insurance Summit, to be held on April 27, 2023 at the Arcadian Loft Toronto, will bring the biggest names in specialty insurance together to explore opportunities and trends. Don’t miss out!
