Earlier this month, Gallagher Re launched its Cyber Risk Adjusted Rating (RAR) Index which looks to measure changes in reinsurance pricing while accounting for expected shifts in underlying cyber risk.
Gallagher Re identified that, unlike property where limit is directly correlated to risk, a cyber reinsurance rating index requires the use of a proprietary view of risk (VoR) – including considerations for:
As a result, it is in having the right consistency of approach that reinsurance brokers can credibly track the reinsurance rating environment year on year.
Ian Newman, global head of cyber at Gallagher Re noted that, while it has performed well in recent years, the cyber market continues to grow and the risk landscape is evolving rapidly.
“Cyber is also a CAT and systemically exposed class and reinsurance buyers are constantly looking for suitable and effectively priced non-proportional protection,” he said. “Gallagher Re therefore believe that over the long-term, an index of the cyber aggregate excess of loss market will provide a useful and insightful barometer as to the state of the cyber reinsurance rating environment."
In a follow-up interview with ReInsurance Business, Ed Le Flufy (pictured), global client lead for cyber at Gallagher Re, shared some of the key evolving risks he sees reshaping the cyber market today.
The first he identified was that of price adequacy as original insurance pricing has been under pressure for several years. A second consideration is around systemic risk, he said, as increasingly complex supply chains are contributing to uncertainty. Finally, he looked to the evolving threat environment. “It is unknown the extent to which new threat vectors, such as AI, will impact the cyber insurance industry.”
As to what reinsurance buyers are looking for in today’s market in terms of protection, he emphasized that buyers are particularly focused on accessing efficient protection from earnings volatility where scenarios such as rate deterioration, increased loss activity and/or low to mid-sized systemic events are a major concern. “For 2025, many are seeking to improve the efficiency of their reinsurance protection whilst the market has softened.”
Addressing how the evolution of Gallagher Re’s Cyber RAR rating came about, Le Flufy said that Gallagher Re is leveraging its unique market visibility to assess the efficiency of cyber reinsurance solutions. This aims to be to the benefit of its clients, he said, but also to further develop the cyber reinsurance market.
“The Gallagher Re Cyber RAR rating displays structural efficiency through the relative price adequacy of non-proportional aggregate structures through time,” he said. As to the reaction from the market to the rating so far, he said that this has been positive. What has also been good to see is how the index has generated interesting discussions with some of the cyber market’s leading insurers and reinsurers.
Outlining how Gallagher Re’s Cyber RAR rating helps reinsurance buyers make the right choices about cyber protection, Le Flufy said the index will support this in two key ways. Buyers have a range of reinsurance solutions to help support their cyber insurance businesses, he said. In addition, the index allows buyers to understand the appeal of non-proportional aggregate structures through time and help them make purchasing decisions given the latest reinsurance market conditions.
What are your thoughts on the key trends shaping the cyber reinsurance market today? Please feel free to share these in the comments section below.
