Creativity, flexibility and ‘a bit of bravery’ needed on complex digital risks

Gallagher Re’s Baden-Baden cyber event is widening its lens beyond cyber, as new digital risks challenge traditional coverage and test the market’s appetite for new approaches that build greater resilience.

Key points:
Soft market ‘ideal’ for innovation
Bravery could pay off
Reinsurer support is critical

A softening market does not have to mean a race to cheaper capacity. It could instead create room for insurers, reinsurers and brokers to test new approaches and be more inventive about how rapidly evolving digital risks are covered and structured.

That’s the view of Jennifer Braney, head of international cyber at Gallagher Re, who argues that the market needs “more creativity and flexibility, and a bit of bravery”, as it tackles a new generation of interconnected digital exposures, from AI and data centres to other fast-moving risks. 

“In a hard market, we might not see as much innovation,” Braney told Baden-Baden Today. “Given the soft market and carriers looking for growth, it’s an ideal time.”

That argument will run through Gallagher Re’s cyber event in Baden-Baden on Monday evening. Now in its third year, the event is deliberately widening beyond cyber into AI, data centres, emerging technology and other digital risks, reflecting both Gallagher Re’s new digital risks practice and the direction client conversations are already taking.

“Digital risk is the number one risk people keep talking about, whether you’re an individual, company or data centre,” she said. “It doesn’t affect just one area; it cuts across everything from personal lines and cyber-physical damage to data centres and AI. We want to be more intentional about bringing the broader digital risk conversation into the cyber event, because that is where the market is already heading.”

AI will feature heavily, alongside data centre aggregation, cyber-physical damage, SME and personal lines cyber and smaller clustered cyber events.

Dragon’s Den

One of the more unusual and interesting elements will be a series of Dragon’s Den-style pitches, with the audience voting on new product areas they believe are most relevant. 

“There is a lot more possible in the market than people realise,” Braney said. “That applies at every level, from those who don’t yet have a cyber product, where there is so much capacity and capability to help them develop one, through to large global cyber insurers tackling data centres and AI.”

AI is also forcing the market to revisit questions it has faced before. Braney compared the current debate with cyber 15 years ago, when insurers were working out what could sit within existing policies and what needed a standalone product.

“That’s what the cyber market has been doing for as long as it’s been around, evolving coverage as digital risk evolves,” she said. Those lessons can now help inform other classes. 

“It isn’t just about pricing. This is about coverage, structures and partnerships.”

Managing accumulation

As coverage evolves, so does the challenge of understanding where exposure is building up and how it should be protected.

“If business is being written across classes for data centres, where is it all going, and is it being managed from an accumulation perspective?” Braney said.

Gallagher Re is developing a tool to help clients understand data centre aggregation. Once those concentrations are clearer, insurers can assess whether they need specialist reinsurance structures or whether the exposure can sit within more traditional programmes.

AI brings a similar challenge. Higher attritional cyber losses could increase the need for earnings protection, while greater clustering or event aggregation could change how non-proportional structures are designed. 

“The nature of the risk and the right reinsurance structures and solutions are interlinked,” Braney said.

Openness to change

Gallagher Re’s digital risks practice, launched just ahead of Monte Carlo, has already prompted strong engagement from clients and the wider market. “Even in the last month, there’s been a very positive response. People are saying, ‘Yes, we’re ready to engage. We’ve set ourselves up.’”

Reinsurers, too, are becoming more willing to engage. A year ago, Braney said, some larger organisations were still establishing a position before speaking openly. 

New products cannot be developed in silos. If insurers develop new data centres or AI cover, they also need reinsurers prepared to support it.

“They’ll be the creative, brave ones who say, ‘We can see your needs. It’s a little different from how we do things now. We’ll work on it. It will take time, but let’s keep the conversation going.’”

“Those reinsurers will be ahead of the others,” Braney said. “They’ll be the ones you would expect to focus on partnership and a long-term approach.”

Baden-Baden, she said, is a chance to move the conversation beyond price. “This is about coverage, structures and partnerships around underwriting and aggregating these new risks.” The event will show how far the market is ready to go.

Jennifer Braney is international head of cyber at Gallagher Re and can be contacted at:  jennifer_braney@gallagherre.com.

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