Cyber insurers should beware of pitfalls in competitive environmentPosted On: Oct. 6, 2017 1:36 PM CST
NEW YORK — The rapidly growing cyber insurance marketplace will demand that insurers maintain underwriting discipline and aggressively manage aggregates, according to the keynote speaker at the Business Insurance Cyber Summit in New York on Friday.
“As threats continue to evolve, we must evolve,” Tracie Grella, global head of cyber for American International Group Inc. in New York, told the audience of cyber specialists attending the event.
The nascent market, full of players that are all trying to compete and succeed, has potential pitfalls, she said.
“One of the dilemmas we face in the cyber insurance market is that we’re in a very competitive and growing environment,” Ms. Grella said. “This type of environment typically leads to a drop in underwriting standards and gathering less information.”
In order to succeed, insurers must be prudent in risk selection and insuring clients, she said.
“To realize this potential opportunity, we need to remain disciplined in our underwriting approach,” Ms. Grella said.
Another area that will require increased diligence is the management of aggregates.
“There’s no denying that cyber risk presents a meaningful aggregation for the industry,” Ms. Grella said, adding that players must “monitor and manage cyber risk across the full commercial consumer portfolio.”
Failure to do so, she continued, could lead to an insurer being blindsided by an unenvisioned or unmonitored aggregation scenario.
Ms. Grella referred to a recent note from Fitch Ratings Inc., in which the rating agency warned: “Underlying cyber risk aggregations of specific insurers may not become evident until after a large or catastrophic event.”
Cyber players will need precise information on their portfolios to properly address aggregations, she said.
“We have to have better visibility into our portfolios, otherwise it will be a significant challenge for us to manage aggregations,” Ms. Grella said.