Cyber market needs pricing stability: Mosaic

Brokers have an important role to play in marking sure cyber insurance pricing is sustainable, according to the head of cyber at Mosaic Insurance.

Yosha Delong, global head of cyber at the Bermuda-based specialty insurer, said it was the responsibility of brokers to ensure business was not placed with carriers that cutting prices in an unsustainable way.

“I think some programmes are priced correctly; some programmes still have some way to go to get to where they need to be,” she told Insurance Day. “My big concern right now is for cyber to be less reactionary in the future. It would be really good just to have a little bit more stability.”

She continued: “Ultimately, this is the brokers’ responsibility. If you’re seeing a new player that’s slashing prices 50%, 60%, is that really in the best interest of your customer to move coverage just to replace that carrier with somebody with more sustainable pricing in two or three years’ time?”

Delong added capacity providers would be reluctant to put their full capacity into the cyber market until carriers could demonstrate issues of accumulation risk were under control.

“What we need to allow people to start opening up that capacity is to be able to demonstrate, through the data process, that we have this accumulation under control,” she said, adding some accumulation events could be avoided through the manipulation of portfolios.

“These things just aren’t as straightforward as some of the disaster scenarios we may envision. The reality [of accumulation risk] can be a lot more complex. If we can start to add data points around that, I think this is going to be a really different conversation in the next couple of years.”

“I think some programmes are priced correctly; some programmes still have some way to go to get to where they need to be. My big concern right now is for cyber to be less reactionary in the future. It would be really good just to have a little bit more stability”
_{Yosha Delong
Mosaic Insurance}

The importance of data was echoed by Neil Barker, director of cyber insurance at Gallagher, who said the future success of the cyber market would be “driven largely by the data collected”.

One of the main underwriting challenges in the early days of the cyber market was a lack of claims data, he said. “When we’re talking about sustainability from a pricing perspective, everything in the past three, four years - all those claims materials - now arms carriers to develop those actuarial models and come up with sustainable pricing as they see it.

“We’re never going to go back to how competitive the premiums were in the cyber markets pre-2019,” he added, pointing out every broker, vendor and underwriter was now trying to collect as much data as possible to take the market forward.

However, Jake Hernandez, chief executive of AnotherDay, a Gallagher risk management business, said there would always be limits to data-led cyber modelling because of the human element involved in the risk. “As soon as there’s that human consciousness element, all bets are off,” he said.

“As soon as you introduce a human intent, whether that’s terrorism or whether it’s cyber, it becomes non-probabilistic because it’s completely, totally random,” he said.