And now as we start afresh in 2022, all eyes are on how – and if – this momentum will be maintained.
We will be reporting on expectations for the year from the cyber market in due course, but one data point to come out of the cyber reinsurance renewals gives an early view from one of the market leaders.
Sources told this publication that Beazley is in the market for quota share reinsurance cover to support $1.4bn of premium – a figure which would represent approximately a doubling of its current book.
And at this size, Beazley’s cyber book would easily surpass that of market lead rivals AIG or Chubb.
When approached for comment by this publication, a Beazley spokesperson would not comment on specific numbers or details and stressed that the carrier’s business plan was “agile” (full statement below).
A major push from any class leader is often interpreted as an early death knell for a hard market. However, digging a little deeper into the specifics of this instance suggest this would be a misinterpretation.
Sources have told Insurance Insider that the majority of Beazley’s income growth would be driven by rate increase, with limited new business.
One source suggested that the carrier put forward rate expectations of around 60%-75% for the year in its conversations with reinsurers, which would mark a projection of sustained rate momentum in cyber between 2021 and 2022 (although in Q4 last year there were some instances of accounts renewing up 100%).
On this basis, some speculated that attaining the full $1.4bn would be a stretch target for Beazley, although they also suggested that gaining reinsurance headroom for growth would give some room for manoeuvre.
Beazley does, however, appear to be an outlier among the cyber market community – to date, this publication has not gathered any intelligence which suggests that any other market has growth plans as ambitious as this.
It is understood that Beazley has told reinsurers that because it started earlier on its cyber remediation – which prioritised portfolio management and risk management over sub-limits and co-insurance – this work is now largely complete and it can benefit fully from rate increase.
Meanwhile, other cyber players are said to be still working on the quality of their in-force book, and plan to non-renew some business in the first and second quarter. A canvass of sources suggests a number of incumbent players expect income growth to fall short of rate increase for 2022, pointing to continued churn on existing books.
Indeed, what we know from wider market movement is that cyber on the whole is still in remediation and retrenchment mode – which would also suggest more of what we saw in 2021, in 2022.
As this publication revealed before Christmas, London cyber MGA Ascent is now looking for a new lead paper provider after Munich Re pulled its 65% line, in a move symptomatic of classic hard market conditions. Other MGAs are also said to have had more challenging binder renewals for 1 January.
Meanwhile, during the Lloyd’s business planning season many were not granted the growth they requested, with exposure growth limited to the best performers – meaning fresh capacity for new business from Lime Street at least has been constrained again for another year. (Pre-market correction, Lloyd’s market share in cyber globally was running at around 20%.)
The dynamics in the primary market have also played out against a tight cyber reinsurance market, with some quota share capacity forthcoming but prioritised for those cedants with longstanding relationships and good disclosure. The excess of loss market is even tighter, with Gallagher Re reporting rate increases of between 15%-20% at 1 January renewals.
Beazley’s $1.4bn premium target is punchy, but all things considered it is unlikely to signal the beginning of the end for the cyber insurance hard market in 2022.
However, if its messaging to reinsurers is to be believed, it is an early mover out of the remediation stage, which would put it in a favourable position for making the pivot to exposure growth.
A Beazley spokesperson said: “Beazley has ambitious plans for its cyber business next year and we are excited about partnering with our brokers and clients in 2022. However, we cannot comment on specific numbers or details at this stage.
“Our cyber business and plans are agile because the market is very dynamic, and we continually review our claims and threat data. We remain committed to helping our clients be ever more resilient to cyber attacks through the investments we have made and will continue to make into our cyber ecosystem and risk management services.”
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