Wednesday, July 24, 2024

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Descartes sees captive opportunity with launch of French cyber parametric policy

Increasing numbers of captives are realising there is an opportunity to write cyber as part of their captive programme, according to Léopold Larios, cyber director at Descartes Underwriting.

Descartes launched Cyber Shutdown Cover last month, a parametric policy dedicated to cyber risk in France.

“Especially when a company has faced a major cyber loss, often insurers will have a new expectation regarding the deductible and amount that the group will carry,” Larios told Captive Intelligence.

“That’s why more and more captives are using their capacity in order to cover cyber.”

The Cyber Shutdown Cover is designed for small and medium-sized businesses, particularly in manufacturing and retail.

Captive Intelligence published a long read in September examining the potential for more captive involvement in parametric structures, and specialists Descartes believe the time is right for greater adoption.

Descartes is a carrier that has primarily written natural catastrophe related parametric policies across the globe.

Larios said Descartes wanted to identify a clear peril and something that could be seen from the outside and assessed, with the company using encryption as a trigger for a claim.

The policy is triggered when a third-party cyber specialist confirms that a cyber encryption incident has occurred at the insured organisation as part of a ransomware attack.

“Encryption can often be seen both from inside and outside the firm, because the bad guys are proud to highlight on the dark web that they have access to the IT system of the company they have targeted,” Larios said.

“The phenomenon of encryption is a tangible change to the integrity of the information, so encryption is the first parameter that we care about, for triggering cover.”

The second parameter for a claim is a forced shutdown of activity.

“With these two elements, we consider that we have evidence of a real loss suffered by the insured,” Larios said.

To rate the product and set the pay-out levels, Descartes uses financial information about the companies it underwrites, as well as information extracted from a questionnaire, which is designed for use with its model.

“We also apply threat intelligence to provide more information about a company,” Larios said.

Larios told Captive Intelligence that he is currently preparing an analysis for specific assets of a client that wants to involve his captive in the cyber cover that Descartes is underwriting to increase the level of coverage for his subsidiaries.

Captive Intelligence published an article last week highlighting that interest from captives in parametric solutions is increasing, particularly in the property market where insureds are looking at managing rising insurance costs.