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Bronek Masojada joined Hiscox Ltd. in 1993 as group managing director and became CEO in 2000. He served as a deputy chairman of Lloyd’s of London from 2001 to 2007 and was chairman of the Lloyd’s Tercentenary Research Foundation from 2008 to 2014. Mr. Masojada recently spoke to Business Insurance Reporter Matthew Lerner about the market, mergers, technology and other topics. Edited excerpts follow.
Q: Has pricing on cyber insurance increased?
A: I think cyber is very cheap relative to the exposure and the cost that can happen. I was looking at a claim the other day, and this is a U.K. context: The small three- or four-person marketing agency which had a turnover of about £150,000 ($188,745) a year which had a breach of some sort and it cost them £30,000 to fix — and that’s for a £500 cyber policy. If they hadn’t had the cyber policy, they would have gone out of business. So to my mind, for a small business, those are pretty good value products.
The challenge quite often is that people don’t perceive that they have the exposure: “Oh, it will never happen to me.” For a small builder, a small DIY or sort of home improvements business, under $500,000, it’s well worth the money.
Q: Who is the cyber client?
A: It’s gone from the biggest downwards, for sure, because the bigger firms have general counsels, they have boards of directors, they are more in the regulatory firing line. But actually the threats have grown. You now have a whole range of people, and it’s always the small people who don’t think they are exposed. But if they are affected, they have the least financial resilience to respond. So bigger businesses are actually more able to take the impacts of these events, and they’ve got more resources. But as you get smaller, you are more dependent on other people.
Q: Are clients bumping up against limits, or are they finding the limits they need for cyber coverage?
A: I think there is a maximum exceeding $500 million, $600 million, and that would be sufficient for most firms. But it always comes back to: Are people prepared to pay that much money to attract that level of capital support? There is a minimum rate on line even in excess of $250 million or $500 million people expect to get. At Hiscox, when we look at our realistic disaster scenarios nowadays, the scale of a really bad systemic cyber event, a significant cloud outage or a significant systemic worm or something like that, it’s appraised from the same level as is a $20 billion hurricane. These are potentially very big economic events for the insurance industry. In the Marriott case (in December), there’s 500 million records I read have been lost. Even if it costs them a dollar per lost record, it’s going to cost them a lot. Could it cost them $2 per lost record? Quite conceivably. I don’t know. But it gives you a sense of the sorts of limits people will need.
Q: Which businesses are growing at Hiscox?
A: Small business insurance is growing, and it’s growing double-digit percentages because we are broadening the scope of coverage, broadening the breadth of firms we’ve got coverages for, growing geographically. We sell these products in the U.S., in the U.K. clearly, France, Germany, Spain, Belgium, Luxembourg, Netherlands. So it’s a pretty big segment for us worldwide. Going from (directors and officers), which includes your businessowner’s policy, to including your travel to including your worker’s comp — the full package. And then making that available, going from white-collar business consultants to home maintenance firms, to janitorial firms, to alternative health care specialists.
Q: What do you see in terms of the market landscape?
A: I think it’s actually been a reasonably expensive year for catastrophe and large losses across the world. Japan had its biggest typhoon ever. You’ve obviously had two hurricanes here in the U.S. You’ve had the wildfires. We’ve had some very big risk losses around the world, some yachts and other related products or other related classes. So it’ll be very interesting to see what happens at renewals. The word on the streets is there’s upward pressure, and you know we would agree with that.
Q: What are the company’s views on mergers and acquisitions?
A: The question is, do we have a desire to engage in M&A? The answer is no. Hiscox is growing organically, and we’ve grown organically. I’ve been here since 2000, and before that I was group managing director. And in that time, we’ve been growing at high single digits, low double digits over a 25-year period. And that’s absolutely our focus: taking/ seeing new segments, taking bets, figuring out how to serve customers well, being good at it. And if you’re good, you grow. The goal is, Hiscox has been growing and has the ability to continue to grow as an independent company.
Q: How is technology affecting the insurance business?
A: You can’t do anything now in any business without it involving technology in some way. You know, two years ago I had no idea what an API was. Now I know it’s an application program interface. The challenge of all of that is how you learn about the technology, and then how do you apply it within Hiscox to make Hiscox a better business? And that’s an ongoing, forever task, whether it’s robotic process automation or whether it’s underwriting automation, it’s just a forever task. And you can’t sit around and do nothing. You have to engage in it. We have a huge direct digital business, online digital business. We were one of the first to launch that in 2011 before digitization became the hot word here. So we’ve been in that space for seven, eight years now. This is a very important business for us at Hiscox. If small businesses were going to buy insurance today, where would they go? They wouldn’t go down the High Street to go and see the State Farm agent. They’d go online. Hiscox is online already and willing to serve you. And if you’ve got a credit card, we can insure you. If you don’t have a credit card, we can insure you. So to me, it’s all pervasive in the business. Just taking that back around to your small and medium-size business owners, maybe five years ago they had their records in a box; now it’s on the computer.
Longtime excess and surplus lines insurance executive Mike Miller announced in April that he was forming a startup E&S insurer, Ategrity Specialty Insurance Co. Backed by an as-yet-unnamed investment management professional in New York, the Scottsdale, Arizona-based insurer is in the process of securing a license in Delaware and obtaining a rating from A.M. Best Co. Inc. Over the past few months, Mr. Miller, who spent 20 years at Scottsdale Insurance Co., has been recruiting staff. Key hires include former Scottsdale — now known as Nationwide Excess and Surplus — executives John Goodloe, who will be chief underwriting officer of brokerage business, and Sandy Vertuno, who will be chief underwriting officer of contract underwriting, which is business Ategrity will derive from agents with underwriting authority for the insurer. Mr. Miller recently spoke with Business Insurance Editor Gavin Souter about his plans for Ategrity. Edited excerpts follow.