Cyber is more than a product or a peril. It is embedded in the very fabric of the world we live in and a feature of every risk and every business that re/insurance touches.
Therein lies the opportunity, but also the challenge. Liberty Mutual Re believes that to understand and manage it better, requires two things: a drive for better data and much closer engagement between reinsurers and their clients. Jennifer Braney, Senior Underwriter, Liberty Mutual Re.
In a market which is still developing fast, knowledge is critical. Liberty Mutual Re first entered the cyber reinsurance market via its strong cross-class relationships with existing clients– a position which it is looking to build on and which has the added benefit of helping it to understand its own and its clients’ exposures in property and casualty treaties and other specialist classes.
Aggregation is less about numbers, more about conversation
As our experience in the market has grown, so our perspective on aggregation risk has developed. Quite rightly, there is a lot of focus on this topic due to the potential for systemic events which can range from critical infrastructure vulnerabilities to ransomware events. However, attempting to limit the complexity of aggregation to a single number can be misleading if the data required to give a true picture is not available. For example, if systems are not set up to capture the various coverages and sub-limits available on a cyber insurance policy or contingent covers are given on an unnamed basis.
This is not necessarily a new issue to insurance though. However, given the range and continuous development of coverage available in the market, it can be challenging to understand what exposure a number represents. Rather than “what is your aggregation?” perhaps reinsurers should be asking “what are you aggregating and how?”. At Liberty Mutual Re we have found engaging with our clients on a regular basis has helped us understand some of these challenges in the market as we endeavor to partner with our clients to tackle aggregation risk.
It has also enabled us to build a picture of the cyber risk landscape which improves our understanding of the potential exposure from non-affirmative and affirmative cyber in other non-cyber reinsurance classes. Interestingly enough, where the market has pushed to make cyber cover affirmative on some insurance policies to plug the cyber gap and address the non-affirmative cyber issue, the market may inadvertently be creating cyber overlap - where multiple policies now affirmatively cover cyber, in addition to standalone cover being purchased. Again, engaging with clients on their approach to cyber is vital and to co-ordinate and assist in these endeavors we have set up a cross-class cyber working group at Liberty Mutual Re.
Growth through partnership
As we look to develop our position in cyber reinsurance, our starting point is always to consider how best we can support our clients. Our aim is to develop partnerships based on knowledge-sharing, expertise and data that enable us all, in the direct and reinsurance markets, to underwrite with skill.