Employment practice liability may provide clues for how cyber insurance will evolve in coming years, Edward Koral, a specialist leader at Deloitte Consulting, told an audience at the VCIA conference.
The employment practice liability product is around 25 years old but at first there was little data to price the policies with. As the product matured it was the claims and losses data from the product itself which provided the data for better pricing.
Cyber policies may be following a similar trajectory, suggested Koral. Coverage is often seen as too expensive, but that is because it remains hard to quantify or even define the risk, or know which companies are highest risk. Once cyber policies have been in the market for some years, the data from those policies will allow cyber insurance to be better priced.
As companies have more data about themselves, they may be better placed to price their own cyber risk, he said. Companies should collect and analyse their own data and put their cyber coverage in a captive with a good capital allocation.
They may be able to buy reinsurance to cover it, added Koral.
Koral said while risks in the market are always changing, and new products are always being developed to insure those risks, products actually haven’t changed that much.
Products are still developed around the concept of being able to define and measure a loss, and priced around the frequency and severity of those expected losses. And the impact of technology on premiums can be unexpected: while cars have become more sophisticated and are now less likely to experience accidents, premiums have gone up because the cost of repairing cars has risen, said Koral.
Vermont Captive, VCIA 2019 Annual Conference, Captive, Insurance, Reinsurance, Employment practice liability, Cyber, Edward Koral, Deloitte