Buyers questioning merits of cyber cover as market hardens, says leading risk manager

The cyber insurance market has become so difficult for buyers that companies are now asking themselves whether it is worth buying the cover on offer, an experienced Spanish risk manager said during a webinar organised by national risk management association Agers. “It has got to a point where one starts asking oneself whether it is worth paying for the transfer of this risk,” said Juan Gayá, risk and insurance manager at retail group El Corte Inglés. Gayá did not cast doubts on the potential benefits of cyber insurance but warned that the conditions and rates currently available are not acceptable for many companies, with capacity a big problem. “The first challenge is to find a carrier that wants to sell me the cover,” he said. “Once I can find an insurer, the next step is to talk about capacity. If I want €20m, in many cases it may be hard to find it. And if the limits can be found, I have to decide whether I want to pay the price.” Gayá said he no longer even looks for what he deems reasonable prices for cyber insurance but simply options that aren’t prohibitively high. If such rates can be found, the cover that companies buy will usually be the most basic, he added. This is because any extra protection – such as physical damage, personal damage or damage caused by employees – carries even higher costs. The three basic requirements for cyber buyers now are a willingness to take the risk, the availability of capacity, and prices that are not prohibitive, said Gayá. “A few years ago, I might look for more things, but now I am happy if I can get those three,” he said. And his concerns over cyber are shared by other Spanish risk managers. Eva Pérez Pastor, risk and insurance manager at logistics firm Transfesa, said the cyber market today is “unsettling”, and that it is hard to say right now to which direction it will move in the future. The most worrying concern is the lack of capacity for companies that need to purchase large limits, said Gayá “If until 2021 we needed one or two insurers to find the capacity we wanted, since 2021 the number has been four or five. And there are companies that no longer have appetite for the risk,” he said. Market players, however, said it is possible to find the capacity needed even though it may not be an easy task. “There is capacity in the market. A growing number of MGAs are willing to provide cyber capacity, and some say that they will start offering next summer,” said Carolina Daantje, director of cyber risks at Willis Iberia. “Sometimes we have placed primary layers in Spain and excess layers in London, as in Spain we cannot find anyone who can adapt itself to the covers supplied by the leader. We have had renewals of clients who buy €300m or $500m and were able to renew. But it has a cost,” she added. In addition to charging top dollar, the few insurers that are still willing to take cyber risk have become much more demanding of the information that they want from their clients before committing any kind of capacity. This is because they want to be confident that the client is doing all it can to prevent and react to cyber risk. “Companies that do not have very strong cybersecurity measures will not be able to buy cyber cover,” warned Olivier Marcén, financial lines leader in Barcelona at AIG. Broker Daantje noted that demand for information from insurers was chaotic last year but seems to be settling down. She said risk managers must find out early what underwriters need and start working on gathering the data and implementing the required measures six months before renewals.

Buyers questioning merits of cyber cover as market hardens, says leading risk manager

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