Speaking to The Insurer TV for #ReinsuranceMonth, Hedley said the strong cyber insurance underwriting results that were being produced have worsened in recent years.
“Cyber was somewhat perceived as a long-term low loss ratio business,” Hedley said. “Not unexpectedly, that’s turned out not to be the case.”
Hedley commented that demand is increasing for cyber both in the primary market and in reinsurance. Some reinsurers, such as Swiss Re, have expressed concern about the cyber market. But he said other reinsurers are taking a more positive view of the sector.
“I think certain major reinsurers are taking a cautious approach, and are somewhat sitting back and seeing how that pans out,” Hedley said.
“I think ultimately that means they try and stick with their renewals and are very hesitant to write new business.
He added: “But other reinsurers are taking a more proactive view at this time and saying, ‘This a market that is getting rate and is definitely in correction.’ Terms and conditions have been tightened up. The problem areas such as ransomware and other areas are being addressed. So there are certain reinsurers that are seeing this as an opportunity.”
Acrisure Re in June announced a partnership with cyber risk modelling firm Kovrr under which the two firms will collaborate on a cyber reinsurance offering.
The broker’s new London-based cyber reinsurance division will be overseen by cyber practice leader Tom Quy, and will combine its advisory and analytical capabilities with Kovrr’s risk modelling tools.
In The Insurer TV interview, Hedley also discussed the casualty insurance market, noting the current positive rating environment.
“It is not a dissimilar situation to where we were this time last year,” he said.
“A lot of rate has been accumulated again in 2021. From what I am seeing so far that is generally ahead of plan. So loss ratio picks I think are going to look very positive once all the analysis is done.”
For casualty reinsurance discussions, Hedley noted the importance of communication between client and reinsurer.
“Our absolute objective will be very clear communication between client and reinsurer about what is happening in the book and setting terms that are a fair reflection of where those loss ratio picks are going, similar to how it was at the last 1.1,” he said.
Hedley noted that there is some levelling on rate in casualty insurance, particularly excess and umbrella.
“But you can’t sustain double-digit rate increases indefinitely so this levelling off is absolutely to be expected,” he said.
“The trick is to keep it up around that level. There is a lot of discipline in the marketplace right now, so the prospects of holding onto a good market for the next year or two are pretty good.”
Hedley assumed his current role of CEO of Acrisure Re in July 2021 from Jason Howard, who took over as president of Acrisure International.