The Federation of European Risk Management Associations (FERMA) has called upon the insurance industry to adopt a more collaborative approach to cyber insurance which balances the risk appetite of the market with the coverage requirements of corporate buyers.
FERMA has raised concerns that the cyber insurance market is evolving in isolation from the industries which it insures and wants to facilitate more constructive dialogue.
The Federation has proposed the development of a ‘COP-style’ annual cyber event, which would bring together key stakeholders to “develop and implement cyber resilience strategies of sufficient scope to address the myriad challenges of the digital age”.
Philippe Cotelle, vice president of FERMA and chair of its digital committee, said: “The corporate market recognises the criticality of cyber insurance as well as the need for the insurance sector to manage its potential exposure to cyber risk, particularly given the systemic risk it poses.
“However, it is also important to ensure that the product remains attractive and efficient for buyers.
“Recent decisions to restrict the scope of coverage have created uncertainty regarding the ability of insurance to meet the evolving cyber risk requirements of policyholders, and in particular for larger corporations which in France, for example, currently make up over 80% of the cyber premium.”
Typhaine Beaupérin, CEO and secretary general of FERMA, said: “To ensure the establishment of a robust and sustainable cyber insurance market for the long-term, it is imperative that all participants are contributing equally to its development.
“Improved dialogue will not only help ensure a product which is fit for purpose but also help build stronger relationships between cyber insurance buyers and the market itself.”
In order to combat capacity issues in the market, Marsh revealed at RISKWORLD that it will be launching a special purpose cyber reinsurance facility in the coming weeks, which will be made available to captive owners who are seeking additional cyber capacity.
Europe has also seen its first mutual formed for cyber with Mutual Insurance and Reinsurance for Information Systems (MIRIS) established in Brussels at the end of 2022.
MIRIS is domiciled in Belgium and will provide direct insurance. It can only accept members from the European Union and European Economic Area (EEA) with €25m of capacity being allocated for each member in its first two years of operation.
FERMA said that without more concerted dialogue between all parties, such as (re)insurers, brokers, buyers, regulators, and service providers, there is a risk that the appeal of the cyber product for corporate buyers may decline due to increasing exclusions and more restrictive coverage which are reducing coverage certainty.
“We need to approach cyber-related risks in a way that is commensurate with the size of the exposure that it creates,” Cotelle added.
“For many risk managers, cyberattacks pose one of the most significant and damaging threats to their organisation, while the systemic risk potential is recognised by all.
“By creating a COP-type event devoted to cyber resilience we can address this constantly evolving threat at the scale at which it needs to be addressed.”
Captive intelligence recently published a long-read detailing how a lack of capacity and high pricing in the cyber market are resulting in increasing captive utilisation for cyber risk.