With the cyber insurance market offering significant growth potential, (re)insurers are considering how to capitalize on this opportunity through prudent expansion of their underwriting capacity.
However, the nascent, ever-evolving cyber risk landscape does create unique challenges that require careful navigation and management, and the tools and techniques currently being used by (re)insurers to help build confidence and understand cyber risk lack the same sophistication and maturity as those used for other mainstream perils.
Without sophisticated, unified, and mature risk management solutions for cyber, (re)insurers often find themselves contending with the issues of limited data transparency and disconnected risk models.
Importantly, without adequate solutions, it has been difficult for (re)insurers to achieve and share a common understanding of systemic or catastrophic cyber risk – vital currency in the cyber insurance value chain, and a key ingredient in developing a sustainable cyber insurance market.
Loss ratios for cyber insurers have also climbed, challenging the ability of the market to capitalize on the cyber insurance growth opportunity, and also raising the fundamental question of whether insurers want to raise capacity at this stage.
It has become clear that to build the required confidence, providing access to single, standardized solutions that integrate modeling, data, and technology across the cyber insurance ecosystem has become increasingly important.
Building Cyber Risk Confidence
To address this, Moody’s RMS and Bitsight have begun to collaborate to deliver the comprehensive solutions that brokers, insurers, reinsurers, capital markets, and insureds will require, from the point of underwriting to remediation, to address the industry’s needs in the years to come.
These integrated cyber risk solutions will be responsive to industry needs as they will be developed under the guidance and direction of a new cyber industry steering committee, with all committee members contributing their deep expertise to address evolving market and stakeholder requirements.
The steering committee will advise on the activities related to this Moody’s-led initiative, and for the overall Moody’s RMS and Bitsight partnership.
To better support capacity through various stages of the cyber insurance ecosystem, a guiding principle for these solutions is to deliver a unified experience that streamlines the risk selection process and facilitates an improved understanding of cyber risk accumulation.
Built upon leading cyber risk modeling and data offerings, both Moody’s RMS and Bitsight believe building these combined solutions is an important step in delivering the cyber risk management revolution that cyber insurers need to realize market demand.
Steering Committee Guidance Drives New Research
One stage toward building new cyber risk solutions identified by the steering committee is a need to research critical but often difficult-to-model cyber perils such as cloud provider outages, and work out how to use new and unique cyber risk data sets – such as Bitsight’s fourth-party and vulnerability insights data – to help identify aggregation risks that could result in significant losses for the industry from catastrophic events.
Using these research insights will help drive the creation of enhanced attritional and catastrophe models developed by Moody’s RMS and Bitsight, and the committee believes the strength of these data-driven models to expand capacity for insurance and reinsurance carriers.
They will also help attract additional capacity from the capital markets through the adoption of alternative risk transfer mechanisms such as insurance-linked securities (ILS).
The ability to understand the true underlying risk of a single insured or a carrier’s portfolios with the best data and analytics will root an ILS team’s belief in its ability to provide the required comfort to investors. Moody’s RMS has already shown traction with the announcement of one of the industry’s first cyber cat bonds from Beazley in January 2024.
Accelerated Product Roadmap To Address Urgent Market Requirements
The committee will also replace the partnership’s technology collaboration related to new integrated underwriting, exposure management, and event response applications. The platform aims to create a single unified view of risk across the insurance lifecycle and offer leading loss control workflows to its users.
The combined solution will build upon Bitsight’s leading cyber insurance capabilities in underwriting direct cyber risks, exposure management, and loss control.
As the teams continue to integrate more Bitsight data into Moody’s RMS core models where relevant, these new workflows will further empower carriers to reduce exposure and related claims, gain insights across their portfolio, and collaborate with insureds to reduce risk.
Ultimately, these research and technology initiatives are rooted in a simple vision; to develop the models, tools, and workflows needed to stabilize highly volatile loss ratios and in turn, drive confidence across market participants.
For more information on Moody’s RMS cyber solutions, click here.
