This column was provided by Jacqueline Spencer-Sim (pictured left), head of cyber at Hamilton Global Specialty and deputy chair of the Lloyd’s Market Association’s Cyber Business Panel and Richard Smith (pictured right), senior executive at the LMA Academy, Lloyd’s Market Association.
The cyber insurance market has expanded rapidly since its beginnings in the late 1990s. In response to a volatile and rapidly changing threat landscape, professionals in underwriting, claims and risk management have had to continually adapt to keep pace.
This was particularly true in 2019, when a huge increase in ransomware attacks tested the cyber product to the limit and stretched the capabilities of the cyber insurance sector. In the ensuing hard market, there was a significant influx of new cyber insurance talent to meet the increased demand.
However, the onset of COVID-19 interrupted and disrupted the early careers of a considerable proportion of young insurance professionals. In many cases, they were denied the opportunity to obtain critical face-to-face training that previous generations could have taken for granted and were prevented from learning crucial ‘soft skills’ through contact with more experienced colleagues.
Post-COVID, the Lloyd’s Market Association (LMA)’s cyber business panel has observed a gulf in the availability of education and training for young professionals moving into entry-level roles. It was felt that there needed to be a focus on re-installing these key foundations of cyber insurance business.
Having cut their teeth at the height of a hard market (that has since softened considerably), junior cyber insurance professionals lack the experience of conducting business through a full market cycle and may be under-prepared for a return to hard market conditions.
A hardening market implies the need to develop coverage options for new and returning clients, whose cyber security posture might make them a more challenging risk to underwrite. This is where experience is key and interaction with senior colleagues is invaluable for young professionals to understand why one risk would be declined and another one accepted.
In the current, highly competitive market, understanding the needs of prospective clients will be a key part of growing the cyber insurance market in future. However, the ability of younger cyber professionals to develop business in new and under-developed markets depends on a broader range of skills and experience than many will have been exposed to during their careers.
Part of the problem in developing the technical skills of entry-level employees has been the drive towards adoption of artificial intelligence (AI) and software tools which have reduced the number of manual administration tasks junior professionals carry out, perhaps at the cost of useful learning opportunities.
The educational environment in insurance has also been impacted by the disruption or removal of face-to-face learning opportunities during COVID-19, which in many cases have not been restored since the pandemic.
Alongside this, there is an educational challenge for underwriting and claims professionals who have spent their careers working in other classes of businesses and who are increasingly being required to take on cyber risks as a part of their portfolio.
The LMA Academy has been running a Cyber Foundation programme to address this technical skills gap and to level the playing field for early cyber careers. The LMA Academy saw this gulf as an opportunity to work with the LMA’s cyber committees to build a foundation programme that offers practical technical education in cyber underwriting, claims, risk management and exposure management, while also creating the environment to develop individual confidence and peer group networks.
Unlike more traditional classes of insurance business where the risk remains relatively consistent, cyber is an ever-changing class where intermediaries and underwriters must take a dynamic approach to the underlying risks and adapt coverage accordingly.
Technical educational programmes like the LMA Academy’s Cyber Foundation programme help to inform LMA members of how the evolving threat landscape affects coverage, the likely impact on clients, and how they can get ahead of the changing cyber risk profile and anticipate what is coming over the horizon.
An ongoing development within the cyber market is the key role brokers and insurers play beyond providing a pure indemnity product, in working with clients to re-assess their cyber security posture, improve their risk profile, and put them in a better position to benefit from cyber insurance coverage.
At the same time, improving the skillsets of junior cyber professionals enables them to make better underwriting and claims decisions, improves portfolio management and drives better performance in the business.
Continued interaction is key to building the relationships and expertise that are the foundations of the London insurance marketplace, and we have a duty to the next generation to ensure they are equipped with the core skills required in all functions.
However, technical learning programmes can only do so much, and it is up to the wider market to ensure that cyber professionals are empowered to actively deploy and apply that learning when they return to their desks, with the expertise and confidence needed to go out and bring more business in to their organisation and the wider cyber insurance class.
