Today’s most pertinent risk


Today’s most pertinent risk / casarsaguru

Bermuda’s re/insurers have led from the front when it comes to understanding and underwriting cyberre/insurance. Three of the Island’s biggest players in the sector discuss with Bermuda:Re+ILS the opportunities—and pitfalls—of operating in this space.

Cyber re/insurance has long been regarded as a rare area of potential growth for the property/casualty industry and that is why, despite its obvious challenges and complexities, many re/insurers have invested heavily in this space in recent years, hiring teams, talent, specialists, and technology—all to help them understand and underwrite this risk.

Bermuda has been no exception. Its global insurers and reinsurers have almost all moved into the sector. Some have invested heavily in gaining market share on the insurance side and moved into sophisticated areas of advice, risk management and crisis management in the process.

The idea behind such strategies is broadly that, in order to underwrite such a complex and ever-changing risk, it makes a lot of sense to get close to it, understand it, and have systems in place to help clients mitigate the potential loss at an early stage.

Sitting behind such an approach on the insurance side is often support from reinsurers—in the form of capacity and further expertise. On this side of the market, companies have been forced to invest in understanding the risk and then to think very carefully about the type of coverage they offer and their limits.

Three Bermuda companies—Hiscox, PartnerRe and RenRe—were willing to answer some comprehensive questions around their appetite for cyber and the potential they believe the market has for further growth. While their answers vary in detail and differ in some ways, there is also much commonality in how they have ended up treating this risk.

First, they all agree that cyber is, and remains, a growth market. Damien Smith, head of specialty at Hiscox Re & ILS, is probably the most bullish in the sense that he says appetite for this product is increasing. He also suggests that while gross written premiums in the sector are tipped to reach $4 billion in 2018, this could rocket to more than $10 billion by 2020.

This is driven, Smith says, by demand from cedants, which are both seeking increased limits and are moving programmes away from quota share arrangements with reinsurers towards excess of loss deals, perhaps indicating a confidence in their underwriting and allowing them to retain more profits themselves.


These sentiments are echoed by Catherine Rudow, senior vice president–professional lines, PartnerRe, who describes the cyber insurance market as continuing to expand at a rapid pace, attracting new buyers in the US and worldwide.

Rudow, who is responsible for underwriting and managing PartnerRe’s North American cyber insurance portfolio, notes that cyber remains one of the few lines of insurance where there is continued organic growth, with cyber-related premiums quadrupling over the last five years.

There are many reasons she expects this growth to continue. These include increased education, headline losses, and new regulations, such as the General Data Protection Regulation (GDPR) which will be applicable for EU citizens.

“As the market continues to grow, and cyber insurance portfolios become larger, insurance companies will increasingly look to reinsurers to help them manage aggregation. We expect to continue to see demand for cyber risk transfer solutions,” Rudow notes.

Jim Riley, vice president, specialty underwriter at RenaissanceRe, agrees on the potential growth in the sector and notes that for many companies, cyber now represents a much bigger and more fundamental risk than traditional perils covered by insurance, such as loss to physical or financial assets.

Riley, who prior to joining RenaissanceRe in 2013 was a treaty broker with Aon Benfield, says companies are rapidly waking up to this fact and this is driving demand in the US and elsewhere in the world.

Grasping the task

Those interviewed also commented on the lengths to which their companies are going as they seek to ensure they fully grasp this risk—and to help their clients and the end users in the process. This means investment in talent and partnerships often.

Hiscox, for example, on its insurance side offers pre-loss services that will be of genuine value and benefit, Smith says.

“The company has created a cyber virtual business unit, which provides a consistent vision for cyber across the Hiscox Group, and which our customers benefit from regardless of which part of our business they deal with.

“We have also hired Robert Hannigan, ex-the UK’s Government Communications Headquarters, as a cyber special advisor,” he says.

He also stresses that Hiscox is partnering with clients to develop bespoke cyber products where possible.

Rudow at PartnerRe says the company’s cyber team looks to transfer knowledge to help clients make the best possible decisions about how to manage their growing cyber insurance portfolios and aggregation risk. It is also a member of the Geneva Association, through which it is contributing to a study that addresses the issue of aggregation risk in cyber, and conducts its own annual Survey of Cyber Insurance Market Trends.

Riley at RenRe also acknowledges that operating in this sector is a job of continuous development and learning. He says that clients will often look to RenRe for a new style of reinsurance product to respond to a particular constraint they have. “In other cases, they may be looking to partner on a new business endeavour and request additional insight from us as a third party,” he adds.

What all three companies have in common is that they understand there is an opportunity—not just for growth but to develop products and services that genuinely have the potential to help companies deal with the most pertinent and challenging risk in corporate life. 

You can read their answers in more detail in the articles that have been listed below.

Judging each transaction on its own merit

PartnerRe is enjoying strong growth in the cyber space—and while it has a broad appetite for cyber risk it considers each transaction on its merits, says Catherine Rudow, senior vice president–professional lines at PartnerRe. Click here to find out more.

More risk than solutions

The majority of economic losses from cyber breaches are not covered by currently available insurance products—this creates a challenge for insurers to create new products, says Jim Riley, vice president, specialty underwriter at RenaissanceRe. Click here to find out more.

Bespoke solutions and partnerships

Cyber represents a growth business for Hiscox Re & ILS and it is forming partnerships and investing to ensure it stays ahead of the game in this rewarding but challenging area of risk, says Damien Smith, head of specialty, Hiscox Re & ILS. Click here to find out more.

Cyber, Bermuda, risk, growth, expansion, PartnerRe, RenRe, Hiscox

Bermuda Re