With Barbican having recently enlarged its cyber team, Bermuda:Re spoke with Geoff White, underwriting manager—cyber, technology and media at Barbican about the rising threats and opportunities associated with an increasingly interconnected world.
What are the challenges associated with getting arms around the cyber threat and associated opportunity?
Education is the key challenge in terms of countering the cyber threat. Cyber is a very broad term which can mean something different to each of us. The matter is further compounded by the fact that there is a degree of misunderstanding surrounding the term ‘cyber’ and what we mean when we talk about a cyber threat. What is needed is greater clarity around what these threats actually constitute and where they stem from. Cyber criminals are becoming increasingly sophisticated in their approach, constantly enhancing their capabilities and exploiting advances in technology. We must be vigilant and ensure that we are responding to these developments accordingly, and having the right coverage in place will be an important aspect of this.
How challenging is it getting clients to buy cyber coverage? Are only those that have suffered an attack/loss coming to market? How are you strengthening take-up?
While the impact of experiencing a cyber attack or a loss relating to a cyber incident have certainly contributed to a greater interest in cyber cover, historically one of the biggest drivers has been the introduction of cyber-related legislation. This has been particularly the case in the US, where since 2005 the introduction of such legislation has led to an increase in the number of companies exploring the use of cyber coverage to transfer their risk. The US market is now estimated at over $1billion in premium, but it is felt that this is only the tip of the iceberg in terms of the opportunities afforded by the region. Other countries are also showing greater interest in cyber cover, but once again any major increase in the take-up of cyber cover will be driven primarily by legislation. Countries such as Canada, UK, France, South Africa and Australia are beginning to lead the charge with others soon to follow. Asia and South America are also seen as key potential markets for future growth.
Take-up is a long process - many companies will take several years from their initial interest to purchasing cover. This is understandable. First of all a risk manager needs to get a price on the radar of his senior management so it can be built into budgets for the next year. Then they need to get a clear understanding of the cyber risks their company faces, which must span all areas of the business. They may identify areas that they need to improve before purchasing an insurance solution, which will require additional spend. Finally they will move to sign off and purchase of the product.
Which aspects of cyber risk are the best fit for the insurance market, why and how will more risks be brought onboard?
All areas of cyber risk have the potential to be covered by the insurance market. The cyber product itself is a continually evolving one, as it develops in response to technological advances and greater levels of sophistication in the cyber-crime arena, and also as we gain more experience in this area. As we see more and more cyber-related claims coming through, this will also serve to influence the direction and extent of the cover which the industry provides.
Barbican, cyber, IT, Lloyd's