A comprehensive solution to cyber
Most companies are grappling with how to manage cyber risk – and more are turning their attention to captives as a risk management tool that can play an important role in this.
This is according to Anup Seth, managing director of Aon Insurance Managers (Bermuda), who spoke to Captive International ahead of the CICA 2018 International Conference in Scottsdale, Arizona.
Seth notes that a captive insurance company can be used to tailor specific coverages and allow a company to have a meaningful retention - or “skin in the game” - lowering the total cost of risk and keeping insurance programmes consistent in the process.
“You can look at the policy form and tailor it for the exposures within your company,” said Seth. “Then you can use that within the captive and buy reinsurance on a consistent basis. It’s very important to have a consistent policy form throughout your entire insurance or reinsurance portfolio.”
Seth suggested that cyber insurance penetration in the commercial insurance markets has been very low to date, and that companies that have bought cyber coverage have typically been large data holders —financial institutions, retail companies and healthcare companies —which are looking for protection against a data breach.
He believes the coverage is now opening up to companies that are not necessarily holding personal data, but have critical technology in their supply chain that may be subject to physical damage, bodily injury or business interruption exposures arising out of a cyber event.
Further benefits of having a captive retain a portion of a company’s cyber risk, according to Seth, is that there are no coverage gaps, and that this solution resolves the debate as to what policy is going to respond to a certain exposure, removing any ambiguity.
“When you look at the industry in total, the cyber industry is worth around $2 to $3 billion. We’re expecting that to grow to $10 billion in the next three to five years, and captives will play an integral role,” Seth added.
For more on Seth’s views on this topic, a longer version of this article is available here and also in the March issue of Captive International.
Aon Insurance Managers, Bermuda, Anup Seth, CICA 2018 International Conference, Arizona, Cyber, Risk management