Falling frequency may curb cyber rates; ‘equilibrium’ on horizon: Beazley
Declining frequency could entice insurers back to a once-foresworn cyber market to help bring “some sort of equilibrium” to enduring hot rate growth, the CEO of specialist insurer group Beazley has said.
“Strong demand growth should continue; we expect the market to gradually move back to some sort of equilibrium over the next 12 to 18 months,” Beazley CEO Adrian Cox told his company’s second quarter earnings call.
Rate growth came down from annual rates above 100% to a “70-ish” figure after the first half in the latest sign of moderation, he noted.
Cox noted only that “other insurers are starting to see attritional loss ratios start to reduce,” in part as corporate security improves and, more recently, as the usual suspects in cyber events have “distracted” themselves with the war in Ukraine. Beazley was “comfortable” with frequency even before the Ukraine war focused cyber events away from core market coverages.
In the first six months of 2022, Beazley has increased its gross written premium in cyber by 77% year on year to $472 million. The group remains “broadly on budget” to hit a full-year GWP target of $1.3 billion. July 1 remains a major date for the group, helping tip the balance of sales to the second half.
The cyber-specialist Beazley, after a vow to lightly increase exposure in 2022, will cap its appetite to avoid losing its broader balance among specialty lines, Cox said.
“We are very determined that we don't become a cyber insurer that does other things as well,” Cox said, with note that cyber is not planned to grow as a portion of the whole in 2023. “You can actually have too much of a good thing.”
Frequency metrics continue to come down, a process which has only been aided, perhaps counterintuitively, by the Russian invasion of Ukraine which has consumed the attention of cyber actors. Ransomware frequency per policy is down 30% since end-Q3 2020. By premium, the decline is now 70%.
The H1 2022 combined ratio is down 22 percentage points year on year to 74%, including an 18 point decline in the claims ratio. Cox attributes the figure to continued lack of cyber cat and “improvement in our pricing and our risk selection.”
Given the capital intensive nature of the business, Beazley is forced to target a combined ratio in cyber somewhat below the group’s overall target of 90%.
Cox claims to be “increasingly confident” that the group’s cyber ecosystem for security management and risk foresight “is materially helping with selection.”
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