Data remains barrier to effective cyber coverage

The ability of cyber attackers to move quickly and target new sectors and markets almost at will is hampering effective product development, according to the head of one major re/insurer.

Despite increased global appetite for coverage for cyber crime, the re/insurance industry has failed to provide any real solutions to the market and that will continue to be the case until the industry has the data to price the risk properly, according to Tad Montross, the chairman and chief executive of Gen Re.

“The industry is seeing cyber coverage opportunities, but it is a difficult product to price, particularly for business interruption and third party liability. We don’t have good data, the exposure is increasing and constantly changing and the perpetrators are well financed and highly motivated,” he said.

Montross recognised that the risk is growing exponentially, but warned: “There are important risk assessment and risk management roles in addition to the product opportunities.”

Like similar firms in the sector Gen Re has seen a reduction in demand for reinsurance as primary companies have elected to increase their net retentions in light of the generally benign loss experience during the past decade.

But he foresaw some good news for re/insurers operating in the catastrophe field.

“In 2013 catastrophes were 28 percent below the 10-year average. In 2014 they were 38 percent below the 10-year average and we haven’t had a hurricane make landfall in Florida for nine years—the longest stretch since 1851,” he said.

“After a long period of negative frequency trends for many classes of business and modest severity trends around the world, we are seeing an uptick in both.”