Leaders on the changing scope of data in re/insurance

Leaders on the changing scope of data in re/insurance | Insurance Business America

Reinsurance

Leaders on the changing scope of data in re/insurance

How to help brokers get more comfortable talking about risk

Reinsurance

By
Mia Wallace

Earlier this month, the catastrophe data service PERILS announced the expansion of its US Cyber Industry Loss Index to include unintentional loss events, in association with CyberAcuView.

Since launching in September 2023, the index has reported on affirmative US primary cyber market losses resulting from intentional events which generate an industry loss exceeding $500 million. It has been used in both ILS and ILW cyber-related transactions. Having engaged with industry stakeholders to generate feedback about the index, PERILs and CyberAcuView decided to expand the index’s scope to include unintentional systemic cyber events. The two organizations will jointly agree on the designation of an event as intentional or unintentional based on the primary cause of the incident.

Using market feedback to create – and update – data solutions

In conversation with Re-Insurance Business at the RVS conference in Monte Carlo, Christoph Oehy, CEO and Darryl Pidcock, head of Asia Pacific and cyber, each underscored the critical importance of stakeholder feedback in crafting great insurance and data solutions. This latest index expansion was the result of close engagement with industry stakeholders to work out exactly what their needs are, said Ohey (pictured left). This has been the same process with all its index developments, including last year’s move to expand its market coverage to include European hail.

“We heard from people how important it was to them to have insight into that peril, and also about how important it is to have real, usable data on severe convective storms in Europe as well,” he said. “We’ve done that for years in Australia and Canada, which is helpful as we’re able to leverage some of our expertise and experience. Because recent events have shown that this is an important area where data can be evaluated to better understand risk validation models.”

When PERILS launched its cyber index last year, it was a clear example of how to effectively leverage feedback into action, because discussions with both sellers and buyers of cyber coverage across the market revealed their interest in having access to high-quality data insights. Transactions completed early in the year identified the value of having insights into how the methodology of the index works, he said. This, in turn, led to the development of a case study into the MOVEit breach, which explained how the methodology works.

The challenge of modelling cyber risk

The CrowdStrike incident also triggered some questions about whether PERILS could start looking into unintentional or ‘accidental’ events which was the seed for the growth of its most recent expansion. Cyber coverage is an especially interesting part of the insurance conversation, noted Pidcock (pictured right) – not least because, as a relatively new line of business, it simply doesn’t have the same wealth of data and claims history found in more established sectors.

“We’ve had a lot of conversations with brokers who are really trying to advise their clients and get themselves and their clients comfortable with talking about cyber risk,” Pidcock said. “Because you have protection buyers writing this book and looking at how they can protect themselves? And then you’ve got a lot of protection ‘sellers’, for example from ILS funds and other various capacity providers. They’re the ones who really want and need to learn more about this man-made peril.”

In insurance, the greatest education tends to come from major events, but when you don’t have access to substantial amounts of loss data, it makes it harder to contextualise what’s happening in terms of trends and create accurate scenario-based models. “What we’re trying to do,” Pidcock said, “is create a situation where we can feed in loss events to our index and create that more accurate view of cyber risk which will help the market’s overall understanding of the risk.”

How attitudes to data are changing

Attitudes to data have evolved in insurance, with companies more willing to share their data if it will result in great insight, and Pidcock highlighted how the power of collaboration runs through the heart of what PERILS is looking to achieve – and is critical to the way it works. For Oehy, who is coming up to the one-year anniversary of his time with the business, this collaboration with stakeholders has been fantastic to see firsthand.

“One of the key elements for me was understanding just how broad our stakeholder base is in terms of interacting with reinsurers, brokers, insurers and reinsurance brokers,” he said. “I think that gives us a unique view into the industry and it’s also what helps us get the feedback that allows us to build and evolve our indexes.

“The developments that we’ve launched – and there have been quite a few now – are only made possible thanks to an amazing team. Altogether we have over 200 years of industry experience coming together to collaborate and build something new. [PERILS] has hit so many great milestones in its 15 years, and we expect to see it hit many more going forward.”

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