In an interview with The Insurer TV, Berry said the action on pricing over the past two years had represented a rebaselining of the market in response to the evolving ransomware threat, rather than a cyclical hard market period.
And while the escalation of ransomware claims was widely perceived as the driver of these increases, Berry said the development of cyber catastrophe models had also played an important role in driving cyber insurers’ push for rate.
“These models are a useful tool but are not yet the perfect science to quantify risk,” Berry said.
“Carriers are using them to help determine the cat loading we need to apply to the portfolio to provide insurance on a sustainable basis, and at the moment the cat models are assuming a very large systemic load, using theories of demand surge that apply to property insurance models.”
Berry said there was significant investment taking place in the cyber cat model arena, but added the market was at present “perhaps not mature enough” to make appropriate assessments of these cat loadings.
“Hopefully in the next two to five years we will be able to do this with more accuracy,” she said.
Contract wording clarity
During the interview Berry called on the market to improve the consistency and clarity of contract wordings to help build confidence in products.
At present, she said clients face a “confusing” array of contracts.
“The big criticism I could bring to the cyber insurance market is lack of consistency in policy wording,” she said.
“That is something we could do better as an industry – to really clarify to the client base what it is and what we are not covering.”
Berry said the core components of cyber coverage are largely the same as when the product first emerged around 20 years ago, but there remained work to do to communicate with clients around what the coverage does and does not include.
“The product works, but the translation of that down to the end client that is purchasing the product is not always effective,” she said.
During the interview, Berry also discussed the following topics:
The importance of taking a proactive approach to cyber risk management
The evolution of the cyber market
The outlook for the market in the next year