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Specialist reinsurance broker Capsicum Re has released a new report, entitled: ‘Addressing Non-Affirmative Cyber’.
The report looks at the growing problem of cyber perils that are neither explicitly included nor excluded, leaving insureds potentially exposed to a lack of cover and the insurance industry with significant unquantified exposures.
The report highlights four factors that are changing the dynamics in the cyber insurance market, including increasing regulatory pressure, the increased frequency of cyber attacks, the lack of uniform implementation of cyber exclusions and finally possible changes in reinsurer risk appetite for cyber, following recent severe natural catastrophe losses.
Capsicum Re said that it is uncertain how these factors might change the market, however, as underwriters understand cyber risks better, there may be a step change in underwriting expertise, a trend that may accelerate if cyber underwriting transitions to specialists under stand-alone policies. The report also suggests it is possible that nothing will happen, leaving the uncertainties and unquantified exposures to increase to dangerous levels.
The report considers several affirmative insurance solutions, such as Brit Cyber Attack Plus, as well as focuses on reinsurance solutions to address this problem. Capsicum Re identifies that reinsurers are responding with both non-affirmative solutions, such as Capsicum Re’s own Cyclone net retention product, and affirmative solutions that include stop loss policies.
“In the face of increasing regulatory pressure, frequency of large cyber-attacks, and a potential macro shift in market dynamics, we have put together this important market report to highlight the growing threat of non-affirmative cyber,” said Ian Newman, global head of cyber at Capsicum Re. “It has created exposures that our industry must address in a meaningful way, and I am confident that the ingenuity and expertise does exist to create effective (re)insurance solutions – at Capsicum Re, we have already started. I encourage those who would like to contribute to delivering comprehensive solutions to read our report.”
Capsicum Re, Cyber, Reinsurance, Report, UK, Bermuda