Intelligent Insurer interviews Fifth Step's Darren Wray in Monte Carlo: understanding the cyber storm

The re/insurance industry’s current understanding of cyber is not good enough, meaning large and potentially interconnected cyber events can’t be predicted accurately.

“The cyber market now is where the natural catastrophe market was in the early 2000s,” said Darren Wray, chief executive officer of boutique consultancy firm Fifth Step.

He explained that previously in the nat cat market, re/insurers knew there would be a certain number of storms over the course of the year but the information was more anecdotal than data-led.

“Then the market started to change. A number of weather scientists began to create software and data that allowed insurers to actually decide what to underwrite,” said Wray.

Currently, the data re/insurers have on the cyber market is fairly minimal. Wray believes that insurers are writing a fair amount of cyber coverage in order to obtain more data.

“The industry has the anecdotal data but not the granularity needed to make informed decisions. The cyber storm cannot be predicted accurately enough,” he said.

Fifth Step works with re/insurers in the industry to help them protect themselves from cyber attack. A key aspect of this is helping companies mitigate risks with their clients.

Wray said: “We work with insurers who are underwriting cyber in a number of ways. Pre-bind, we work with insurers to identify their clients’ risks.”

He added that Fifth Step also undertakes post-bind reduction which, Wray said, “helps the insured mitigate risk so it becomes a lower profile target for cyber attack.”

This process also reduces the insurer’s risk, according to Wray, as it is less likely to have a major cyber claim off the back of its insureds because something had been missed.

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