In a conversation with Faries at Appleby’s Bermuda offices, he explained how the industry is not going from a well-worn playbook when it comes to tackling cyber threats, and is instead “basing things on principles that have worked in the past in different contexts.”

Indeed, cyber’s omnipresence across multiple lines of business has been forcing the industry to re-evaluate its traditional approach to risk.

Only recently the International Underwriting Association published two new London Market model clauses to help underwriters manage cyber losses and address issues related to non-affirmative cover.

Both clauses were developed in response to concerns raised by the UK’s Prudential Regulation Authority about the unclear provision of cyber coverage for various classes of insurance business.

Despite its inherent challenges, the presence of cyber-related products continues to grow, with a recent report showing cyber security spending across 5,400 organisations to have increased significantly from the previous year, with total expenditure reaching $7.9 billion.

“If you look at the rising risks among most organisations, cyber is right up there, if not at the very top of the list,” Faries noted. “That was far lower ten years ago.”

“One stat that struck me recently was: by 2021, just two years from now, the cost of cyber crime may reach $6 trillion, an immense number which would be challenging for traditional markets to underwrite anywhere near that.”

“And now – because in a capitalist system supply will follow demand – as the realisation of cyber threat grows around boardroom tables, there is a growing demand for products to help manage the financial exposure.”

However, despite the seemingly inevitable role cyber insurance will play long-term, Faries did flag the industry’s near-term ability to keep up with the risk.

“The rise of cyber threat and questions around whether the market is going to be able to successfully create products and structures to help business mitigate and manage that risk [is a concern].”

“Right now it is uncertain as to how big it is going to get,” he added. “It is a very different world of risk than even ten years ago.”

“I am mostly an optimist so I see opportunities rather than threats more often.”

Share
Twitter LinkedIn Email Save as PDF
More Publications
25 Jan 2021 |

Appleby Bermuda contributes to Private Trust Companies handbook

Appleby have contributed to a new publication titled “Private Trust Companies: A Handbook for Advi...

7 Jan 2021 |

Employment Act 2000: Government Bill Proposes Significant Overhaul

At the end of November 2020 the Government tabled various bills in the House of Assembly that will, ...

6 Jan 2021 |

Brad Adderley joins Bermuda’s Risk Transfer Hall of Fame

Bermuda:Re+ILS brings you the seventh instalment of Bermuda’s Risk Transfer Hall of Fame. In every...

29 Dec 2020 |

Finding focus after COVID-19

Bermuda’s economy has been buffeted by the challenges of COVID-19 during 2020. But a robust respon...

29 Dec 2020 |

A new era for ILS on Bermuda

Bermuda remains the world leader in the ILS space. But as the sector grows and evolves, it must stay...

29 Dec 2020 |

Time to thrive, time to innovate

As the reinsurance industry grapples with the challenges of COVID-19, Bermuda is poised to play an i...

21 Dec 2020 |

ILS to go from strength to strength: Brad Adderley

The twin, positive impacts of rising prices and much improved terms means that the hardening market ...

15 Dec 2020 |

Americas Restructuring Review 2021

This chapter discusses the defining features of Bermuda’s insolvency landscape and the primary ins...

15 Dec 2020 |

The Insolvency Review – Eighth Edition

The eighth edition of The Insolvency Review offers an in-depth review of market conditions and insol...