Advisen FPN

Advisen Cyber FPN - Wednesday, June 30, 2021

Cyber insurance is evolving and here to stay, say underwriters


Cyber insurance is evolving and here to stay, say underwriters

By Erin Ayers, Advisen

The current hardening cyber insurance market and focus on sustainability mark a positive step in this still relatively new sector’s evolution, according to experts speaking during a recent “Tuesdays With Lloyd’s” broadcast.

After broadening coverage and buyer interest over the last two decades, cyber insurance now faces a challenging market, one where capacity has lessened and insurers are tightening up the “gray areas” of coverage, according to Jacqueline Spencer-Sim, head of cyber at Hamilton Group. Currently, she added, underwriters aren’t restricting coverage so much as “diversifying” based on risk exposure and claim frequency and severity.

“’Broadening’s a bit of a misleading word, because it makes it seem like cyber is so wide now, we’ll write anything. And we don’t. We’re evolving, not broadening,” said Spencer-Sim during the virtual event.

Insurers adapt their appetites all the time based on losses and risk exposure in other lines, according to Laila Khudairi, divisional head of enterprise risk at Tokio Marine Kiln. Cyber insurance is undergoing a natural, necessary correction, she added.

“The difference is, the other lines of business have had 50 or 100 years to find their way, whereas cyber’s only been able to do that over really the last five years,” said Khudairi.

The question on cyber insurance used to be whether, for buyers, it was a worthwhile product; now the question is whether the market is sustainable, according to Gillian Anderson, global head of cyber and technology at SCOR Channel.

“The product is viable and it has responded in claims and probably has responded in a way we didn’t even necessarily contemplate but has been very beneficial to many insureds,” she said. “The market has evolved in line with what the client needs.”

The result, Anderson added, is more sophisticated underwriters and a comprehensive product that works well for insureds.

“It has to be a continuous process of reviewing what we’re intending to cover and having the clients review what they think their key exposures are,” she said.

In some cases, coverage may have become too broad. Khudairi highlighted contingent business interruption cover for non-IT service providers.

“Those could result, if given with too much frequency, in an unsustainable market,” said Khudairi.

Kaitlin Upchurch, senior vice president, cyber practice zone leader at Marsh, and moderator of the event, commented that part of the challenge now for brokers and buyers is evaluating their true exposure and purchasing what they need. She asked the panel for insight on how they underwrite and price amid the current risk landscape.

Underwriters evaluate submissions on a case-by-case basis, the panel agreed, but geographical location, revenue, customer base, and reliance on technology have become key underwriting criteria.

“We have complex underwriting procedures, but we are writing a complex risk, and with that comes certain expectations of the client and the broker,” said Spencer-Sim. The adoption of higher self-insured retentions and coinsurance, she added, is a good thing.

“Recognizing that you have to have a bit of skin in the game will make you realize that this is actually a product that will help you, not hinder you,” she said.

The industry has invested significant time, effort, and money in modeling cyber exposure, systemic risk, and pricing adequacy, according to Anderson. The latest headlines about the cyber market’s questionable viability do not tell the full story, she said.

“Don’t be put off by that press, because the market has adapted and will continue to adapt,” said Anderson.

It also continues to present an opportunity for the industry, especially for brokers who specialize in cyber.

“This product is here to stay. It’s no longer the tough sell it was 10 years ago,” said Khudairi. “There are still a number of insureds and companies who do not purchase cyber. There’s opportunity there, and more chances for brokers to shine.”

Editor Erin Ayers can be reached at