Howden Re’s Flandro: Insurers must write more cyber risk

Howden Re’s head of industry analysis and strategic advisory David Flandro has urged insurers to increase their cyber coverage as improving data and analytics expand knowledge of the risk.

The Insurer TV sat down with Flandro recently at Howden Re’s cyber reinsurance summit for their clients, which was held at Ascot racecourse and coincided with the release of Howden Re's comprehensive report, ‘Re-framing cyber risk: navigating threats and embracing opportunities’.

"Insurers should write more cyber risk," Flandro said, emphasising the evolution of cyber threats and the necessity for enhanced insurance solutions.

"The cyber landscape is evolving rapidly, and the frequency and sophistication of attacks are only increasing. It's imperative that insurers step up to provide the necessary coverage,” he said.

Reflecting on the past, Flandro recalled the time when cyber insurance was deemed too complex and uncertain for insurers to envisage meaningful GWP growth, but noted that this has now changed.

"Eight years ago, a colleague humorously stated that ‘nobody should be writing this because we don't understand it’. Given the rise in ransomware attacks like WannaCry and NotPetya since then, the landscape has drastically changed," he said.

The report highlights the discrepancy between rising cybersecurity spending by corporations and the relatively stagnant growth in cyber insurance premiums.

"There's a gap that needs filling. Companies are investing heavily in cybersecurity, but reinsurers and insurers aren't matching this with adequate coverage," Flandro said.

A notable finding from the report is the stark contrast in risk tolerance between nat cat and cyber reinsurance.

"Carriers willing to take significant bets on nat cat are often hesitant with cyber. Yet, given the 200 percent increase in cyber primary pricing since 2020, there's a significant opportunity for reinsurers to step in," Flandro explained.

Despite a slight softening in prices, Flandro believes the market remains ripe for expansion.

"Rates are still elevated, and this is an opportune time to capitalise on that,” he asserted.

The cyber reinsurance summit at Ascot also featured a panel hosted by Flandro which delved into the nuances of cyber underwriting and reinsurance, as well as risk tolerance levels.

Speaking ahead of the session, he said: "We're going to dive deeply into how risk tolerances are set, highlighting the variance and the need for a more consistent approach compared to nat cat," he said.

Flandro is optimistic about the future. "Larger carriers are currently cautious, but the smaller and medium-sized ones are innovating. We categorise underwriters into cyber-cautious, cyber-curious and cyber-confident. There's ample scope for more to become confident as cyber risk matures."

The message from Flandro was clear: the insurance industry must embrace cyber risk coverage to meet the growing demands of the digital age.

Watch the 5-minute interview with Howden Re’s David Flandro to learn more about why insurers should be more confident in writing cyber risk.