13 September 2017Insurance

Allianz may seek additional reinsurance protection for cyber

Allianz is pondering whether it should buy more cyber coverage, Amer Ahmed, CEO of Allianz Re, which handles the insurer’s reinsurance buying programme, told Monte Carlo Today.

The insurer is already buying specific cyber reinsurance policies in some instances, but there might be demand for more, he said.

“It starts at the front in terms of what cyber risk exposures you take on and what clients want to buy. As this develops and evolves we will have to look at what reinsurance we need for that specific risk,” Ahmed said.

Cyber cover is seen as one of the few growth opportunities in the current soft market. Gross written premium of the global cyber insurance market is expected to grow to $8.6 billion by 2020 from $3.4 billion in 2016, according to Munich Re estimates.

“It is an ever-growing exposure which is beginning to be better understood by everybody in the chain,” Ahmed said.

Demand for cyber protection is growing on the back of cyber attacks which have affected several industries and regions in the world recently. A massive ransomware worm dubbed WannaCry hit several organisations such as the UK National Health Service and Spain’s telecoms firm Telefonica in 2017. In June, many organisations in Europe and the US were crippled by a ransomware attack known as Petya.

For Ahmed, who buys reinsurance coverage for the Allianz group, demand for additional cyber protection will depend on what the different Allianz units require.

“There is a lot of discussion about it. It’s still evolving, but as each of the incidents come to light it becomes more of a focal point for any enterprise to consider what risk they face and how they want to mitigate it and what protections and services they need access to keep their businesses running,” he said.

Allianz has centralised its reinsurance management within Allianz Re, which buys reinsurance cover to manage and reduce volatility. It also buys capital-driven reinsurance in order to take out tail exposures. As a result of the centralisation, Allianz is buying less reinsurance while allowing the organisation to buy it in a more efficient way.

However, future reinsurance purchasing volumes will depend on what Allianz wants to optimise and what the market’s appetite and offerings are, Ahmed explained. Allianz is pushing digitisation within the group which might affect the reinsurance purchase in terms of quantity and speed, he noted.

For the upcoming renewals, Ahmed expects prices and conditions to remain relatively stable. However, this will partly depend on the loss scenarios on the hurricane front, he noted.

“Any place where there has been a major loss activity or major change in exposure I would expect a reinsurance cedant then to talk in more detail in terms of both price and conditions,” he concluded.

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