How do I discuss tail risk with my clients for credible reinsurance program structuring?

Cyber risk is a dynamic, man-made peril that is evolving rapidly. The motivations of cyber attackers, their methods and the technological vulnerabilities they exploit are constantly in flux. Developing a robust, defensible view of risk in your client’s portfolio and identifying the cyber events that could bring tail risk to their books is difficult.

The forward-looking nature of cyber risk – with too few precedents to systemic cyber-attacks to reliably use past experience to predict future events – creates increased uncertainty for reinsurance buyers and portfolio managers trying to identify portfolio exposure accumulations and develop impactful reinsurance programs.

For brokers to advise their clients on how their portfolio exposures look for extreme events and how that might inform reinsurance advisory, they need a tool that offers flexibility to vary frequency, severity, and other assumptions to dynamically stress test model outputs.

CyberCube’s Portfolio Manager enables stress-testing by varying frequency distributions, frequency mode and severity modes. Scenario specific analytics also include conditional loss distributions allowing users to see the total range as well as interquartile results per scenario. Portfolio Manager allows you to drill down and identify loss drivers and areas of accumulation risk across multiple lines of business.

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How does Portfolio Manager help?

Scenario-based data-driven model from the top-down portfolio view
Exceedance probability metrics at various return periods
Ability to drill down and identify loss drivers and areas of accumulation risk
Easy to use data schema requiring minimal inputs, but accepting policy-level detail to increase the specificity of results

How do I identify client-specific risks for transfer and have holistic risk negotiations with capacity providers?

Every carrier’s risk portfolio is unique, with specific compositions by industry, business size, geography, and insurance coverage lines. Accumulation risk can occur not just in standalone cyber policies but is increasingly identified in non-affirmative cyber exposures in other P&C classes of business.

There is also a significant disparity in cyber insurance wordings, pricing, and coverage, making it difficult to identify a market consensus on coverage. This increases the work that needs to be done by reinsurance companies when considering their pricing and program structures.

As a broker, how do I advise my clients on specific areas of exposure and accumulation risk in their portfolios? When armed with that information, how do I have an effective conversation with reinsurers and other capital providers, to find the best-fit solution for my client? How can I confidently negotiate pricing and structural decisions with reinsurers, based on risk exposure and client risk tolerances?

CybeCube’s Portfolio Manager is a scenario-based systemic cyber risk model offering reinsurance purchasers flexibility in analyzing the relationships between coverage types and cost components. The CyberCube interface allows users to adjust the relationship between coverage types and cost components to better reflect the risks that are covered against modeled scenarios. Users can run probabilistic scenarios that highlight specific cost components to allow for sensitivity testing of potential product changes.

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How does Portfolio Manager help?

Easy to use data schema requiring minimal inputs, but accepting policy-level detail to increase the specificity of results
Direct technical support for customized inputs and interpretation of outputs
Ability to drill down and identify loss drivers and areas of accumulation risk
Exceedance probability metrics at various return periods

How do I help identify and negotiate accounts being considered for facultative placement?

Identifying accounts that insurers may want to get facultative coverage for requires understanding the estimated financial loss distributions for an account as well as which cost components may be driving the larger loss scenarios. Additionally, understanding the cybersecurity profiles of such accounts can arm a broker with additional insights to better aid in acquiring relevant reinsurance coverage that will respond in the optimal way given a loss occurs. Knowing where a client can increase or cut back on premium dollars while still hitting their coverage goals is imperative to helping them optimize their budget. This could come through adjusting exclusions, sub-limits, and overall occurrence/aggregate limits.

Broking Manager provides detailed visibility into the loss distribution associated with an account. These reports can be quickly created and further tailored based on additional information provided within the risk assessment function to enhance discussions around coverages, limits, sub-limits and additional pre/post-loss services that may be of interest.

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How does Broking manager help?

Account specific recommendations on contract terms and conditions
Ability to show the impact of client-specific security posture and business practices
Data-driven analytics tied back to insurance product features, known claim types, and security data signals that may impact buying decisions
Quickly produce initial reports and update in real-time during meetings