Adrian Cox, Chief Executive Officer of specialist insurer Beazley, said this morning that the US cyber insurance market is now unprofitable and continues to soften given the active claims environment.
The year-to-date 6% rate decrease for cyber risks is steeper than seen in all other divisions except property risks, which saw a 7% negative rate change year-to-date.
During the call with analysts, Cox reiterated the message in the earnings release that persistent rate reductions in North America have occurred since 2022, and this is in spite of increasing frequency and severity of ransomware claims in the market.
Cox explained that Beazley pushed for flat rates during the important North American July renewal season in cyber, again emphasising that this is necessary “given the increased levels of cybercrime and liability claims the market has experienced”.
The effort to keep rates flat in North American cyber has improved the year-to-date rate change, but Beazley’s new business is down, said Cox.
“We do find the lack of market discipline in North America somewhat surprising given the claims environment. This does need to adjust if we are to avoid the extreme swings in pricing that we saw in 2021 and 2022,” he said.
Later in the call, Cox was questioned further on the cyber book and provided some more colour on market dynamics.
“There is increasing talk about the cyber market and its lack of profitability in North America, particularly amongst the reinsurers, but we’re not seeing that impact market behaviour yet, which is why we’ve sort of called that out earlier in the call today,” he said.
Later adding: “We’ve been maintaining rates on our side of business in the US since July, we’ve been successful in that. Our retention levels are down a little bit, but not very much. It’s the new business that’s been really impacted on that. We will continue to do that. It’s important to us that we maintain the profitability of our cyber business, and if that means the US cyber business continues to shrink, then we will carry on doing that because we believe it’s the right thing to do. It’s not the first time we’ve had to do something in a cyber book that the market has taken a little while to catch up on. But, it is relatively short-tail business, so the lack of profitability will be fairly obvious, I think.
“So, we are hopeful that the cyber market at some point will begin to correct. But the longer it waits, the sharper that correction will be, which is really in no one’s interest.”
Beazley is one of the world’s largest writers of cyber insurance and reinsurance, and alongside its results announcement, the firm also revealed that it plans to launch a cyber insurance-linked securities (ILS) fund strategy as part of its new Bermuda platform set up, as covered by our sister publication, Artemis.
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