In this video interview with The Insurer TV, Erica Davis, Global Co-Head of Cyber, talks about cyber controls, attracting new capital in the sector, as well as what she expects going into the January 1 renewal season.
Erica describes a newly refined view of what adequate controls on cyber threats look like, which could result in opportunity and growth, with reinsurance playing a critical role.
“About 40 to 50 percent of the overall (cyber) risk is ceded to the reinsurance market,” she explains. “That is higher than more mature lines of business and I think innately cyber risk feels a bit more ‘catty,’ a bit more volatile, and so our cedents are really looking for long-term partnerships on the reinsurance side.”
With heightened scrutiny around data and greater transparency surrounding cyber threats, Erica envisions greater interest—and capital investment—in the cyber sector.
“It has been a favorable trade throughout 2023,” Erica explains. “With all of that being said, as the market matures, our clients are looking at how to drive better efficiencies in the market, making sure that we're always innovating, looking at fresh new structures, in order to bring continued capital into the space.”
With improved data has come improved cyber modeling as well, Erica continues. While newer models are less divergent than they were in previous iterations, they still do not align perfectly, leading Erica and her team to pursue a multi-model approach.
“From a cat-modeled view, we're finding it very important as we engage with clients to conduct scenario comparisons, cat (catastrophe) load comparisons, as well as taking a very deep dive into the non-catastrophic performance,” she explained. “And our clients are really bifurcating out their view of risk, based on non-cat and cat. That's true in the modeling. It's also true in the underwriting and the pricing of the risk.”
Regarding conditions around January 1 renewals, Erica expects an “orderly” renewal season.
“There is abundant capacity in the cyber market now; we are expecting there to be structural exploration conversations,” she continues.
Click image below to watch the full interview