What will the cyber insurance market look like in five years? And when do you see rates stabilizing? They were two closing questions posed to four cyber insurance leaders in the ‘State of the Market’ panel at the sixth annual NetDiligence® Cyber Risk Summit in Toronto last week – and the responses varied, reflecting just how complex and fluid the cyber insurance market is today.
Dan Lewis, SVP, management liability practice leader, Gallagher Canada, said he expects to see at least one more cycle of rate increases and requirements for stricter cyber risk controls until carriers reach a point where they’re able to write cyber with a loss ratio better than 100%.
“I see that happening,” he said. “Also, maybe two-years from now, hopefully some of the new capacity that’s coming into the US will come into Canada as well, and profitability will return to the marketplace. I don’t think it’s going to take five years; I think it will happen sooner than that.”
Greg Markell, president and CEO of Ridge Canada Cyber Solutions, emphasized that as more reinsurance supply starts to trickle into Canada “over the next couple of years,” there should be some stabilization in the market, as well as normalization of rates.
Over the next five years, Markell expects a “different” cyber market in Canada – one influenced by tools, controls, and more partnerships, information sharing, and multi-stakeholder collaboration.
He said: “There are a lot of tools that are known to be very effective when it comes to scenario impact [modelling] and mitigation. But they have not been monetized very well in Canada, and they’ve been out of reach for a lot of small businesses. But as that sector continues to push forward and becomes more accessible, I think the control elements that we’re underwriting too [will also] mature.”
Fellow panellists Andrew DeGroot, VP of enterprise accounts & international sales at Relay, and Vishal Kundi, founder and CEO of BOXX Insurance, also stressed the importance of cybersecurity controls and the impact that greater uptake will have on the cyber insurance market in general over the next five years.
DeGroot commented: “As more controls are put in place, and as the risk is better understood, [I think] there’s going to be more commonality across the industry in what’s offered and the underwriting process.
“Like many other insurance industries – for example, D&O – you’re going to see that the variety of offerings [in the cyber insurance market] today will start to narrow and start to focus into more common products that make brokers’ lives easier and clients’ lives easier – and that will be driven by better understanding of the industry and what the risks are.”
Before positive market-wide change, Kundi expects to see “more dislocation”. He predicts that larger companies with more cyber risk controls and more ability to convince underwriters that they’re meeting risk management requirements will be able to achieve more sustainability at their end of the cyber insurance market.
“I think the arms race is going to be on the small business [side] and even below that with the gig economy and all the people who are now working from home,” said Kundi. “How can we [the cyber insurance market] give them the confidence that we’re not going to go up and down without being able to see the controls they have in place.”
The BOXX Insurance CEO rounded out his comment by saying “we’re all safe for jobs” in the cyber insurance world. He added: “This digital climate is going to continue to grow and expand – and that’s going to be great for the world. But with that comes uncertainty, and …. [cyber insurance] is going to become vital.”
