Willis Re looks to help grow cyber market
While cyber risk holds great growth potential for the industry, insurers lack knowledge on how to manage this risk. Willis Re is looking to help put this right, John Cavanagh, chief executive officer of Willis Re, told Monte Carlo Today.
He was speaking after the broker’s press conference in Monte Carlo in which it discussed the main drivers for reinsurance growth, including cyber risk and technology.
Cavanagh explained that cyber risk can often by associated with physical damage, making definitions and underwriting it difficult.
“With a cyber attack on an electronic plant which causes an explosion, you’ve got a data breach and then the first party exposure,” he said. “So between the two types of exposures, we’re trying to create a model that addresses that and tries to get some form of probable maximum loss (PML) around it.”
He added that the broker is using multiple techniques to try to get a handle on this risk. “First is to try and measure the risk, second is to try to mitigate it. Reinsurance is then the ultimate backstop. It’s about managing the capital. Since I’ve been in the business there have been several exposures such as cyber where markets have collapsed, but we’ve built those markets up again.”
He estimates that the market is about $3 billion in size. “Our objective is to put more capital in the game. It’s about consultancy, advisory, risk management, risk mitigation and reinsurance services that we bring,” Cavanagh said.
“There’s more demand than supply at the moment. People are really quite nervous about getting into it. They feel they don’t have the expertise, they don’t have the confidence around the PMLs, they don’t have the knowledge.
What we are trying to do is bring the capabilities to the table and give them more comfort around it.”
Willis Re released an updated version of its cyber risk portfolio modelling tool PRISM-Re during Monte Carlo. PRISM-Re was first released in February 2015 and helps Willis Re’s clients manage their cyber portfolios and estimate downside risk arising from a privacy breach.
The company said the 2016 update to PRISM-Re offers the market its first access to the modelling of cyber losses on a worldwide basis arising from network outages, in addition to data privacy breach.
Cavanagh has high hopes the updated model will help.
“Cyber technology is a very rapidly moving business, in terms of evolving exposures,” he said.
“Every time there is a type of breach, it’s different from the last one and now the cloud technology is evolving the means by which data is captured. We are trying to stay on top of it and consult our customers around the impact of that to their PMLs,” he added.
“We’ve done a lot of research around the product, we’ve got a big team on this because we’re really excited about it.”
