Insurers ceding ever more cyber as risks remain volatile: Swiss Re
Insurers are ceding as much as half of cyber premiums to reinsurance and defying the traditional trend to retain more risk as products evolve on account of an unpredictable and evolving risk environment, a key officer from Swiss Re has indicated.
Swiss Re’s head of cyber reinsurance John Coletti (pictured) puts the current figure at “about 45-50%” of cyber premium ceded and wails “Who knows?” when asked for likely directions. “Such a dynamic market is hard to predict.”
So far, trends in cyber cession have broken known patterns.
“You would think that as the models get more reliable, insurers would be comfortable taking more on their own balance sheets; that is a trend one would expect,” Coletti told journalists.
Instead, “that number has actually gone up a little bit over the past few years,” he said, attributing the latest wave of primary carrier jitters to the rather unexpected rise of ransomware.
Cyber insurance may be out of its infancy, but its latest face on any given day, most recently ransomware, is never more than a few years old. “With technology, it is always evolving,” Coletti noted. Actuarial data remains “not very standardised” and “coming at you in different ways” all the way until attention has moved on to the next big thing.
Those types of unknown unknowns become “the most critical challenges we have” when it concerns possible risk aggregation. “With cyber it is very hard to predict what that is: cyber may go one way, then shift another way, then go all over the place.” The known-unknowns in cyber aggregation currently focus on mass malware or the cracking of a major cloud venture.
The boon that Swiss Re takes from heavy reinsurance is access to a tremendous load of data from primaries. Their current focus: to build a “cyber data ocean” of risk and claims data from across the industry, and possibly, following a data culture being built at Swiss Re, to translate it to a single standard and consider allowing for third party insights.
Coletti puts the cyber market at nearly $10 billion today and says the sky is the limit for outlook given the pace of digitisation in the market. Ransomware made it real for a huge swath of society and the corporate world, pushing the possibilities well beyond the standard specialist line.
“Everybody has a cyber exposure,” Coletti said. “It makes that almost a limitless pool for insurance.”
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