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Evolving cyber risks top broker, insurer concerns


COLORADO SPRINGS, Colorado — The changing nature of cyber liabilityis a key issue for insurance agents and brokers.

“Cyber is definitely the hot topic,” said Richard Hylant, executive vice president of Toledo, Ohio-based Hylant Group.

“Cyber’s on everyone’s mind. It’s an emerging and evolving risk,” said Mike Foley, CEO, North America Commercial and Regional Chairman of Zurich North America.

He said that as recently as two years ago, it was hard to get customers to think about cyber liability. Now, they are far more aware of their risks, he said.

But cyber was far from the sole area of discussion during the Washington-based Council of Insurance Agents & Brokers’ Insurance Leadership Forum last week in Colorado Springs, Colorado.

Continued industry consolidation, a softening property/casualty market and the never-ending search for new business opportunities also trigged conversation at the event. Of course, concern remains on how the insurance industry, on the underwriting and brokerage sides, can attract the talent it needs, said attendees.

For underwriters and brokers, cyber presents opportunities and risks, participants said.

Cyber is “the new EPL,” Steve Brockmeyer, president and CEO of the Bolton Co. in Pasadena, California, and immediate past chairman of the council, said, referring to employment practices liability coverage.

Cyber is “morphing a little bit,” said Peter Gilbertson, executive vice president of Wells Fargo Insurance Services USA Inc. in Madison, New Jersey. He said the focus is shifting to third-party breaches, where “soft damages” such as anxiety over the breaches can win damages in court.

“The cyber catastrophe hasn’t happened yet,” said Mr. Gilbertson, referring to an infrastructure attack. Cyber is one of the few places where there is premium growth for underwriters, said Ben Walter, CEO of Hiscox USA Inc. in New York. He said underwriters are trying to come to terms with risk aggregation issues.

“Nobody really knows the right pricing for cyber,” said Robert Cohen, chairman and CEO of Denver-based IMA Financial Group Inc. and newly elected vice chairman of the council.

Despite questions, brokers continue to look for ways to expand cyber coverage. For example, Mr. Hylant said his brokerage is offering cyber coverage on every renewal.

Industry consolidation was another hot topic. Recent transactions such as the proposed acquisition of Chubb Corp. by Ace Ltd., Humana Inc. by Aetna Inc. and Towers Watson & Co. by Willis Group Holdings P.L.C. mean a change in market opportunities for brokers.

But consolidation discussions centered more on “who’s next” than deals already announced, said Hank Watkins, president of Lloyd’s America Inc. in New York.

The consolidations continue in a persistently softening property/casualty market.

Low interest rates, relatively benign losses and an abundance of capital are expected to keep pressure on prices for a long time, said Don Bailey, president of global sales at Marsh L.L.C. in New York.

“It’s a relatively flat soft market with some softening,” said Mr. Cohen. “It’s still line-by-line.”

“It’s getting softer except for, maybe, auto,” said Mark A. Miller, president of Hylant Group’s Ann Arbor, Michigan, office.

During the second quarter, there was downward rate pressure, especially on large-layer property accounts and workers compensation, said Mr. Foley. He said insurers still need to maintain rates because of ongoing low interest rates.

Not surprisingly, brokers are considering new segments for growth.

“Mid-market is still the foundation,” said Mr. Cohen. “Our tech and life sciences areas are growing. … Our cyber liability is growing.”

Brokers want to write new business, retain clients and control costs, with organic growth being the “holy grail” in these three areas, said Mr. Gilbertson.

Brokerages are showing a “strong interest” in personal lines and select commercial accounts generating less than $100,000 in premiums, said Mr. Hylant.

Mr. Cohen said IMA has initiatives in small-commercial and high-end personal lines.

From the underwriter side, there’s a “huge push” down-market, with an emphasis on “historically underserved” high net worth personal lines and small-commercial business, said Hiscox’s. Mr. Walter.

Tapping that market presents a huge opportunity for Hiscox, said Nicole Goodwin, chief underwriting officer.

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