Cyber reinsurance markets are ripe for innovation

Well, what I would say is mo- most of the innovation has been quite practical in nature.

Uh, we're seeing far more customized aggregate solutions that are built around, uh, what I would say is very specific client concerns.

Uh, things like earnings volatility, uh, capital relief, balance sheet protection.

Uh, rather those specific concerns rather than one-size-fits-all, uh, structures.

Just to give you a couple of examples, we're, we're seeing far more flexibility around attachment points, around pricing, uh, around premium structure, or even, um, the, the window o- of loss aggregation within, within the treaties.

What I would say is that, uh, optionality has, has definitely come back into the markets.

I think we, uh, we, we've raised this point in, in the last 12 months or, or so, but, uh, I think we've, we've seen, uh, an increase in, in execution, and, uh, ourselves at Guy Carpenter have, have driven, uh, the, the return of, uh, risk excess of loss structures.

So, um, I think since we've last, last spoken in, in Monte Carlo perhaps, Francis, we've, uh, we've placed a few more of, uh, of those, so risk excels.

Uh, those had stepped back from the cyber market for, for a few years, and they're, they're now re-entering the, the arena and, and our, our clients have, uh, have asked us to, to execute on those.

I would say also optionality, uh, using, using that theme is, is now extending into the retro markets, uh, as well as the, uh, the, the reinsurance markets.

We're seeing combinations like, uh, excessive loss on excessive loss and placing, uh, quota shares on, on quota shares, uh, and other variations that, that give clients, uh, and reinsurers more, more flexibility.

So again, g- g- going back to a Guy Carpenter example, uh, we, we've placed, uh, what we call Cyber XXL, which was a, uh, an excessive loss program on a, on a blend of quota share and excessive, uh, loss, uh, treaty, uh, so another, an- another retro product.

So we, we've spoken about cyber standalone, uh, products and, um, you know, we, we've, we've also seen growth in, in combined solutions.

So to give you an example around cyber and property combined structures, we've, we've placed the first, uh, combined cyber and, and, and property, uh, um, treaty at, uh, at one-one.

And that started life as really a tail capital relief product, uh, for, for clients that, that saw very uneconomical terms, uh, minimum rate on line far out in the tail.

And actually by combining two products, they were able to justify a, a purchase.

And I think reinsurers were, were, you know, happy to, to, to support that on the basis that, you know, that was the difference between a, a client buying reinsurance and not buying reinsurance.

So we're seeing by combining perils that are non-aggregating out in the tail, there is a case to be made that, that cedents would, would buy more, more reinsurance, uh, at the top end.

You know, I, I would say to, to, uh, to, to conclude my answer to your, to your question, you know, overall the, the innovation is, is a lot less about inventing entirely new products.

It's, it's really more about adapting existing tools to, to where cyber portfolios are, are today and, uh, and, and just really meeting clients where their needs are.

So, so a lot of it seems to come down to, to building, you know, tailored structures to meet specific client needs.

Um, how, how important is it to the maturity of the market as a whole that, that you can, you know, innovate these kinds of, of products?

It is very important, but, but perhaps not in the way people often assume.

I- innovation is, is really a sign that both cedents and reinsurers are comfortable, uh, to move beyond standard templates, uh, and actually solve specific problems.

So, uh, over the last five years, we've really seen the range of available structures grow significantly, and that, that is a reflection of a maturing market.