Most ILS funds exposed to cyber risk as activity grows: PCS – Artemis.bm

Most of the insurance-linked insurance (ILS) fund managers are concerned about cyber risk re/insurance and have little control over the risk, meaning that the ILS space is “ready to use more insurance,” according to Tom Johansmeyer, Head. on PCS.

A recent study by PCS, a Verisk business, tried to assess the ILS fund manager’s feelings about cyber insurance and reinsurance risk and examine the misconceptions about the ambition of ILS, amid the lack of power in the cyber market.

The first charity study includes representatives from 24 ILS funds, which represent 78% of the ILS market and managed assets (AuM).

“A persistent and prevalent misconception in the traditional insurance market is that ILS funds preclude them from participating in technology, as well as many other human-made business groups,” explains Johansmeyer.

The results of this survey show that this is not the case, where 95% of those surveyed by AuM revealed that they are not prohibited from participating in cyber insurance services by liability, although 28%, or five funds participated in the survey. , has some restrictions.

In fact, only two of the respondents have the ability to prevent cyber threats. Of these, Johansmeyer explains that one has no interest or appetite for risk, while the other has been eager to explore the market.

At the same time, “Several funds explained that they do not have the desire for cyber re/risk insurance, although sales in the business group are not directly prohibited by their responsibilities,” says Johansmeyer.

So, although a lot of money is free to enter the space of cyber re / insurance, for some, there is still a lack of appetite, although research shows that these are few.

By AuM, 71% of respondents are interested in cyber risk re/insurance. Of these 13 respondents, several indicated that they would step in when they felt the time was right, or when their colleagues had enough time.

“Among the respondents who want to use cyber risk re/insurance, some said that they have already done so, and are committed to the business community or are showing interest in cyber risk, which has not been achieved due to a lack of cooperation,” explains Johansmeyer.

Although eight respondents to the PCS survey said they are not interested in cyber risk, it is not because they have not analyzed the market. Overall, 18 funds, which is 85% of AuM, said they have reviewed the cyber market.

Of these findings, Mr. Johansmeyer says, “The ILS sector knows that there is a great need for cyber insurance, which means the need for reinsurance and reinsurance, which means that eventually the market will have to act. In fact, several of the respondents suggested that they could take action. in this case, understanding that, in the end, they have to think about their cyber vulnerability in order to be part of the market.”

When it comes to ILS’ actual involvement with the cyber insurance and reinsurance sector, Johansmeyer explains that it has been happening regularly, although the sales have been small.

In fact, with AuM, only 25% of the ILS area sold cyber risks, which is behind other private businesses. However, “the fact that more than a quarter of the sector has experience with cyber shows the basis for the growth of the market in the coming years,” says Johansmeyer.

The final question addressed to ILS funds was asked whether or not they were exposed to cyber reinsurance deals with traders. The data shows that 12 respondents, including most of the top 10 by AuM, were represented by reinsurance brokers.

“Most respondents who were not exposed to cyber re/insurance indicated that insurance brokers knew that, for them, there were no incidents that could be considered,” explains Johansmeyer.

“The lack of funds that many in the cyber insurance market are struggling with can be solved by using new sources, especially the ILS sector. The belief that the ILS market was not very interested in cyber risk came directly from the lack of consultation with the ILS team. In short, no one asked about their appetite for cyber risk.

“This study shows that, contrary to the prevailing opinion, the ILS market is ready to consume more cyber insurance, which will help the sector to grow and play an important role in social stability and financial security,” he concludes.