Cyber market going from strength to strength – Beazley’s Bantick
The latest episode of the Voice of Insurance podcast features Paul Bantick, Global Head of Cyber Risks at Beazley.
Despite an upsurge in ransomware attacks and the nervousness of reinsurers about wordings and systemic risk, the cyber insurance market goes from strength to strength. Rates have nearly tripled over the past three years, while the market’s US-focused origins are being broadened as the whole world begins to consider cyber threats and intangible assets akin to physical risks in size and stature.
London market carrier Beazley has a special place in the cyber insurance market as the first insurer to offer standalone cyber breach protection, more than a decade ago, pioneering a new market that has since ballooned in premium terms. Paul Bantick, global head of cyber risks at Beazley, the latest guest of the Voice of Insurance podcast, has played a prominent role in leading cyber product innovation.
As host Mark Geoghegan pointed out, Beazley’s gross cyber income was already well over a billion dollars in 2022 and is still growing strongly into this year on the back of seemingly insatiable demand. That said, the market is at a crossroads, with rates adjusting down slightly after three years of hikes, while wordings for things like cyber war coverage have been clarified and tightened. How the cyber market continues to develop is very much in question.
Bantick noted that many people have compared the cyber market to those for errors and omissions (E&O) and directors’ and officers’ (D&O) liability markets, both of which have a tail.
“And it’s not – cyber is a short-term market. What we’re seeing more than ever, is that it’s starting to work and look and feel like a short-tail market looks,” he said. “Yes, we saw some rapid hardening. Why? Because we saw a lot of claims, and we saw the threat landscape move, and ransomware became prolific, effectively overnight.”
The cyber market’s price landscape is a rapid reflection of the claims environment, shifts in loss frequency and severity, which have come up and then down, as well as developments in resilience among clients and a changing risk landscape.
2020-2022 were “an aggressive two years” in terms of cyber insurance pricing but also the underlying risk environment, he emphasised.
“We understand that the price increases were hard for clients and brokers, but if you look at it over a four or five year period, you’ll see that cyber is now returning what we needed to return,” said Bantick.
Claims trends and pricing have both eased, allowing a softening of prices this year, while cyber insurers have maintained profitable combined ratios.
“Frequency and severity have come down a lot, which we were hoping for, and perhaps the rate was slightly over pushed a little bit over a two year period of increases. What you’re seeing right now…is some of that rate being given back to clients, which is always what we said we would do, and to do the right thing,” he added.
However, he added a word of caution about signs of returning cyber claims activity. The market is “on a knife edge”, Bantick warned.
“What we’ve heard from lots of others – not just in insurance but in the wider cyber ecosystem – is that frequency and severity are back. They are starting to go up again, and the ransomware attacks are back,” he said.
“Many people hypothesised that would happen as the Russia-Ukraine War started. From a cyber standpoint, we always thought at some point that criminal activity would return. We’re in a market where you’ve got frequency and severity potentially coming up, and we’ve got prices coming off. We’ll see what the next quarter or two brings, and it’s going to be quite interesting to watch,” Bantick added.