Brokers able to offer bespoke cyber products more likely to succeed

Insurance brokers able to develop bespoke solutions rather than simply sell fixed products covering cyber risk have a better chance of gaining market share, according to Peter Hacker, group chief innovation officer at broker Ed, speaking at the Ed Cyber Academy event in London.

In what remains a challenging environment for both insurers and brokers, Hacker believes that developing a bespoke response is crucial because there are no standard awareness frameworks or guidelines for risk managers, brokers and insurers to evaluate cyber-crime and cyber risks.

The cost impact of cyber on the global economy stands at $1 trillion at the moment, Hacker claims.

“Cyber risk has an unparalleled nature, with high volatility, high frequency, high severity and a potential global nature,” Hacker said.

He compares this with a natural catastrophe such as an earthquake, which has high severity, but is regional and has low frequency.

There is also potential for a systemic risk. An interconnected cyber incident – for instance a failure of systems on a global basis – could therefore have consequences to the global economy.

Hacker believes the volatility of this sector has also drastically developed over the last three to four years, citing various prominent attacks made globally against well-known brands.

Furthermore, he said that while that cyber is by no means a new risk, its risk spikes are now unparalleled.

Going forward, Hacker said that bespoke solutions, offering services for risk awareness, modelling, bid management, risk detection and quantification, will be key in tackling cyber.

“The relevance of this industry as far as cyber security, cybercrime and risk transfer is concerned, we very much depend on whether we can structure bespoke solutions,” he said.

Hacker said that some of these solutions will be capital market solutions due to the spike of the exposure, but he also sees potential in the ILS market in the long-term.