The fastest way to get out of a conversation with someone at a party or family gathering is to tell them you work in insurance.
If you’re reading this, you probably work in insurance, so you know I’m right. I have a cousin who is an actor in LA and goes to Burning Man every year so he’s the creative one and I’m the boring one…
But it’s really a shame because more and more, I find myself describing insurance as incredibly creative which is not the adjective most people would use. Cyber insurance is the perfect illustration. Insurance is a centuries-old industry and a saturated market, so when new risks come along that people want be insured against, it’s exciting stuff.
Insurance is just one component of cyber risk management which includes the utilization of organizational strategies to preserve the integrity of information and corporate intangible assets. However, many people are finding cyber insurance can be a very effective tool for behavioral marketplace change. Just by looking at buying cyber insurance coverage, businesses are educating themselves about their information, processes and security. Insurance is acting as a catalyst for assessment and this increased awareness is a very good thing.
At the Council, we are busy pouring over your responses to our second Cyber Market Watch Survey (stay tuned for the results the week of October 5) and we’re really enjoying learning about the innovative, creative things you’re doing in cyber insurance. Most impressive to me is that even though this is a very young, dynamic market, you’re making it work. There’s not a long history of cyber risk, compared to other risks, so there’s not a lot of underwriting data on breaches and cybercrime. There’s a lot of uncertainty and even more exposure, so there’s not really a lot of capacity especially for larger limits. But there’s a real risk to companies’ bottom lines and so there’s an appetite for this coverage, and you’re coming through with solutions.
Carriers, brokers, and modeling firms are partnering with cybersecurity firms and carriers are partnering with one another. We learned this week that Beazley is partnering with Lloyd’s syndicates managed by Brit Global and Aspen to form the International Cyber Consortium. Their plan is to bring an additional $60 million of capacity to the cyber insurance market.
Also this week, Ace announced plans to start offering cyber security policies providing up to $100 million in coverage. The plan comes with services from firms that help identify cyber security vulnerabilities and respond to cyber attacks. They include BitSight Technologies, FireEye Inc.’s Mandiant services group, Navigant Consulting Inc., NetDiligence, Promontory Financial Group and Verizon Communications Inc.
Brokers are building towers of coverage, overcoming capacity issues and low individual limits. The capital markets are starting to take interest – I see Insurance Linked Securities and Cat Bonds in our future – and there are also discussions (mostly internationally right now) of establishing public-private partnerships and government backstops.
This is just the beginning and it’s already moving like a speeding train. If you’re not terrified of cyber armageddon, you should be excited by the future of cyber insurance and all the creative products our industry is going to create.
Tell that to Uncle Mike the next time he’d rather talk to your cousin about Burning Man than talk to you about insurance.
Amy Roberti is vice president of industry affairs at The Council. She is responsible for analyzing commercial property/casualty and group health insurance market conditions, macro and micro events, and issues and trends impacting insurance brokers.