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A new report has noted an escalation in both cyber claims frequency and severity for businesses across all revenue brackets in the first half of the year, with companies whose earnings exceed US$100 million witnessing the most substantial rise (20%) in claims and encountering greater losses due to attacks — a 72% spike in claims severity from the latter half of 2022.

In its 2023 Cyber Claims Report: Mid-year Update, active insurance provider Coalition presented an analysis of cyber trends in the first half of 2023. Faced with a surge in cyber assaults, Coalition’s claims data exhibited a 12% upsurge in cyber claims during the first six months of the year, primarily propelled by notable spikes in ransomware and funds transfer fraud (FTF).

Additionally, Coalition’s report highlighted a surge in ransomware claims frequency in 1H 2023, up by 27% compared to 2H 2022. The severity of claims also hit a record high, witnessing a 61% increase from the previous half and a staggering 117% surge over the past year. Furthermore, cybercriminals amplified their ransom demands, with the average ransom standing at US$1.62 million — a 47% escalation over the previous six months and a 74% upswing over the last year.

Through the company’s active cyber insurance, Coalition also touted achieving the recovery of US$23 million in stolen funds — all of which was returned directly to policyholders. Notably, Coalition’s total FTF recovery amount was nearly three times greater than that of 2H 2022, averaging US$612,000 per FTF claim and covering 79% of all FTF losses in recoverable instances.

Other key findings for the cyber market

Additional pivotal findings from the report included a 15% rise in FTF claims frequency in 1H 2023, accompanied by a 39% escalation in FTF severity, resulting in an average loss exceeding US$297,000. Moreover, during this period, Coalition successfully negotiated ransomware payments down to an average of 44% of the initial amount demanded.

The report also highlighted businesses utilising Google Workspace for email as these firms demonstrated a higher level of security compared to those employing Microsoft Office 365 (M365) and on-premises Microsoft Exchange. M365 users were over twice as likely to experience a claim in contrast to Google Workspace users, while on-premises Microsoft Exchange users were nearly three times more likely to face a claim than businesses using Google Workspace.

Overall, companies leveraging Google Workspace experienced a 25% reduction in risk for FTF or BEC claims and a 10% reduction in risk for ransomware claims.

“The cyber threat landscape has become more volatile, and, as a result, we’ve seen claims become more severe and more common than ever. To help prevent these costly and disruptive incidents, organisations need to take an active role in improving their security defences and make risk management a top priority,” Coalition incident response head Chris Hendricks said.

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As an experienced snowshoer, the daunting sight of steep slopes is a familiar one to Verisk CEO and president Lee Shavel (pictured). When you set out on a snowshoeing trek, and you’ve climbed the slopes and you’re looking down, he said, you do wonder, ‘how am I ever going to get down there?’ The answer is simple but effective – it’s all about taking things one step at a time and not getting caught up in the destination.

It’s only when you look back that you realise how far you’ve come, he said, and it’s the same when he examines the progress made on Verisk’s stated mission to become “a better strategic partner for the global insurance industry”. Shavel was appointed CEO in May 2022, taking up the additional mantle of president in December and he highlighted how much he has enjoyed getting to know the business, its leaders and the initiatives it’s pursuing to support this mission.

“When I joined,” he said, “one of my hypotheses – and the one I think I was probably the most concerned about – was that we had been a very good product organisation but in the service of better partnering with the industry, we have room to grow in becoming a better client organisation and engaging at a senior client level to understand their needs and the needs of the wider industry. That required us, as an organisation, to elevate that dialogue and I knew I needed to lead – reaching out and initiating those new conversations.”

Understanding what insurance companies want from their partners

Utilising multiple channels, including CEO and CIO roundtables and individual client meetings, Verisk was clear from the outset about the opportunity for its strategic clients to provide open and candid feedback. What was a pleasant surprise, he said, was how clearly clients outlined their desire to have a strategic dialogue with Verisk and to utilise the company’s resources to support their growing data, analytical and technological requirements.

Insurance clients are looking for strategic partners that have the scale and expertise to tie these requirements together and integrate them into their processes and procedures, he said. And they’re also keen to understand how their peers in the market are leading or leveraging technological and data transformation – and what they can learn from that. This is allowing Verisk to take on more of a “counsellor” role at a strategic level which, in turn, is opening up new ideas around how the firm can better serve the industry.

“In one of the conversations we had, there was some frustration around legacy issues which it was important for us to hear and understand,” he said. “But during the second conversation, the client requested that we talk them through what we’re doing for them, but also what we’re doing for others that might be of value to them.

“That was an incredibly impactful conversation for us because rather than us pushing ideas from the bottom up, this was a top-down mandate which I think enabled us to better serve the client. And we’re going to have a six-month follow-up on that to make sure we’re continuing to deliver on the expectations we’ve set and to ensure regular dialogue with our clients at the strategic and enterprise-wide level.”

The challenges and opportunities facing the market

From those conversations, Verisk has gained a horizon view of the challenges and opportunities facing its strategic partners at this time and Shavel noted that there’s no shortage of either.

The number one concern is shared by many, he said, and centres around how inflation is impacting the insurance industry.

When discussing inflation, he said, it’s easy to zero in on the first-order inflationary impacts but what’s becoming clearer is how inflation is impacting supply chains in terms of disruptions and scarcity. This, in turn, is introducing levels of delay in repairing entities which entails greater costs. The impact of these knock-on costs and disruptions needs to be understood at a local and granular level because supply chain concerns are on clients’ minds, certainly from an existing exposure loss and claims standpoint but also, on the underwriting side, around how this can be factored into pricing.

There’s also a strong regulatory challenge around this, he said, particularly in the US where different states have differing regimes and approaches to pricing. California, for instance, by statute, doesn’t allow insurers to base pricing on any forward-looking estimates, which creates significant challenges in a market where costs are changing so rapidly. So, helping clients navigate that regulatory landscape in order to make the right underwriting and pricing decisions within their local markets is high on Verisk’s agenda.

“The third challenge is that all our clients struggle to some degree with the data and technological environment that continues to change rapidly as we deploy a much more cloud-intensive data infrastructure, with growing numbers of datasets and analytical approaches,” he said. “In almost all of our conversations, the impact of generative AI is a very active topic, as is how we can work with the industry to safely explore the application of that technology to different dimensions of their businesses.”

The changing face of data and technology

Interestingly, he said, this third shared challenge around technology and data is also where the real wealth of opportunities open to the market can be found.

Shavel noted that there has been a “generational shift” in the technology leadership in insurance companies. Even just 10 years ago, there was some concern and suspicion of the security risks associated with moving to a more cloud-orientated environment. But now there is a broader industry-level acceptance that, while cloud-based structures must maintain the highest possible security profiles, they are very beneficial from an economic, analytical and operational standpoint.

“Cloud-based structures [present] an opportunity for the industry to better price and manage their business by utilising broader, more current and more dynamically managed datasets,” he said. “I think it has also opened up new forms of insurance, the most immediate example being usage-based insurance, particularly on the motor side, where, as we have collected more data around driving behaviour, underwriters are becoming more comfortable in developing pricing structures for usage-based policies.”

For Shavel and his team, helping clients traverse the challenges and take advantage of the opportunities facing the insurance industry at this time is what makes Verisk’s position in the market so exciting. Going back to the snowshoeing analogy, he noted that he does look back on what the business has achieved and think, “wow, did we actually do all that?”

“We’ve come a long distance,” he said. “But I don’t think you get there by giant leaps but rather consistent progress against your goals. We’ve done a good job of outlining our team goals, and then everyone individually expresses their work towards achieving them.

“I think we’ve gone a long way in reorientating our purpose and getting the pieces in place. What I’m hopeful of now is that we’ll be able to continue to build on the great work that we’ve done with clients and and accelerate how we help them seize the opportunities we’re seeing in the market.”

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Markerstudy sees the challenges in the UK personal lines market as a runway for further growth, following a deal to acquire Atlanta Group, the personal lines brokerage of Ardonagh Group.

Leaders said the new player created by the merger could surpass £3 billion in gross written premium (GWP) very quickly.

 “We would like to be a one-stop shop for insurance,” said Kevin Spencer (pictured), CEO of Markerstudy Group.

Spencer also said the merged business would be able pursue more opportunities for growth, both organically and through M&A.

“If something comes along, and it’s opportunistic, we can consider it, and that’s the beauty of the combination,” he said at a recent press briefing. “We can operate really dynamically when something comes up.”

Ian Donaldson, CEO of Ardonagh Retail, said: “That’s always been a passion of mine… to give that diversity of product and diversity of distribution, so you never relied on one or the other. This [deal] expands that, absolutely.”

Tackling the personal lines market

Asked where they could see opportunities for organic growth, Donaldson named standard home and motor insurance as major areas.

“Given what’s going on at the moment, it’d be crazy not to be pushing hard in motor,” the chief executive said.

While customers are shopping around for better rates, he said, Atlanta can strengthen its pricing sophistication and distribution channels to widen its footprint.

“We are, within Atlanta, quite restricted on some of our footprint,” Donaldson said. “This deal gives us the opportunity to take that even further.”

Customers also ultimately benefit with a broader suite of products available in the market, the CEO set out. Significant brands in Atlanta’s book include Swinton, Autonet, and Carole Nash.

“Considering the cost-of-living crisis, what can we offer that’s different? How can we be a bit more competitive? How can be a bit more sophisticated in the pricing? How can consumers get great brands and great products, but slightly more competitive prices? That would be the challenge we put to ourselves,” Donaldson said.

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Intact Financial Corp (Intact), a Canadian multinational property and casualty insurance company and the parent company of RSA, has started the sale of RSA’s personal insurance business, according to reports.

A Bloomberg report revealed that Intact has been working with JPMorgan Chase & Co to gauge buyer interest in the personal insurance business, which is valued at approximately £500 million and covers everything from home to pet protection. The business also sells insurance policies directly to clients and includes partnerships with other financial institutions.

Strategic review

Toronto-based Intact and Danish insurance group Tryg A/S acquired RSA in 2021, providing Intact with control of the business’s Canadian and UK and international operations. Meanwhile, Tryg took the business’s Swedish and Norwegian arms. In March, Intact announced that RSA’s personal lines business will exit the competitive market for motor insurance.

Through RSA, Intact has been expanding into commercial insurance in the UK. This month, it announced the acquisition of the brokered commercial platform from Direct Line Insurance Group Plc in a deal that could rise to £550 million. Intact said it will continue to pursue a strategic review of its personal lines business in the UK.

“The strategic review of these options is underway and is expected to be completed in Q4 this year,” a spokesperson for Intact told Bloomberg.

SiriusPoint has announced the appointment of Stephen Smyth as head of marine in London, effective October 16. Additionally, Smyth is set to become the active underwriter for Syndicate 1945, pending Lloyd’s approval.

The company has revealed that it is keen on expanding its insurance portfolio through its London branch and Lloyd’s Syndicate 1945. With over 30 years of experience in UK marine insurance, Smyth was named a valuable addition to SiriusPoint, lending support to the Stockholm-based marine team and advancing the company’s marine capabilities in the London and international markets.

In his capacity, Smyth will reinforce SiriusPoint’s international underwriting leadership, optimising performance within existing portfolios and aiding the group in meeting growth and profitability targets. Additionally, he will play a key role in assessing new business prospects.

Formerly at Travelers, where he successfully established a profitable specialist insurance operation for UK marine risks as managing senior underwriter of marine, Smyth brings a wealth of experience to SiriusPoint. Prior to Travelers, he held other prominent roles, including head of UK regional marine and head of office at Beazley.

His extensive career also encompasses marine underwriting positions at Allianz, AIG, and Commercial Union. Notably, Smyth was a member of the Joint Cargo Committee at Lloyd’s of London from 2001 to 2009 and served as the UK market lead for Public/Private Partnership with NaVCIS Freight (National Vehicle Crime Intelligence Service), reporting into the National Police Chief’s Council.

Reporting to Robert Harman, general manager of SiriusPoint London Branch, as well as CEO & managing director of Sirius International Managing Agency (SIMA), the company reiterated that Smyth’s expertise will be instrumental in driving the business forward.

“I am very pleased to welcome Steve to the business,” Harman said. “His experience and expertise will be a great asset as we focus on building out SiriusPoint’s marine underwriting specialism and develop our business in Syndicate 1945 and internationally.”

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No-code insurance platform tech provider INSTANDA has named Kevin Gaut (pictured above) as its new chief technology officer (CTO).

In his role as CTO, Gaut will lead the platform and ecosystem strategy, leveraging INSTANDA’s architecture to deliver value to clients and focus on educating the industry about the advantages of no-code versus low code. His key responsibilities include close collaboration with current and prospective clients to pinpoint new growth opportunities within the insurance technology sector using the INSTANDA platform.

His appointment follows INSTANDA’s announcement of a $45 million fundraising deal led by Toscafund, a European growth equity investment firm specialising in financial services companies, which was made public one year ago.

“We are delighted to welcome Kevin as our new CTO. His extensive experience and proven track record in driving innovation make him the ideal leader to enhance our platform and create even more value for our clients,” INSTANDA CEO and co-founder Tim Hardcastle said. “With Kevin’s strategic vision and expertise, we are well positioned to accelerate our growth plans and continue to empower and enable insurers from across the globe to create positive change for their businesses and end customers.”

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In July 2021, with lockdown lifted in the UK and life gradually returning to normal, consumers and SMEs were less concerned about an insurer’s claims performance.  

For example, the CII’s Public Trust Index recorded that only 64% of SMEs rated the statement ‘I have a choice in how the claim is settled’ as important in summer 2021. Indeed, for SMEs, speed of claims, respect shown while making a claim, and control over the way a claim was paid were ranked the lowest of the nine elements of consumer trust for importance.

Fast forward to summer 2023 and speed of claims now ranks second out of the nine elements, with all three climbing above price.

In these uncertain economic times, it appears that SMEs have less of an attitude of ‘I’ll cross that bridge when I come to it’ about claims. They want the claims process to be fast and flexible, giving them a choice over how it is paid.  

So, it is reassuring that our latest research shows that claims professionals are rising to this challenge. Our latest data shows that 74% of SMEs were likely to rate performance against the statement ‘I have a choice in how the claim is settled’ as positive in summer 2023.

That’s good news given that the FCA’s Consumer Duty, which came into force in July this year, introduced ‘consumer support’ requirements for the first time. That means firms have a regulatory requirement to ensure, in the FCA’s words, that ‘the means of making a claim should be easy to find and the firm should not… create barriers to them making a claim’.

Our public trust index will continue to provide a unique window into how insurers are meeting increased consumer expectations in this key area of reputation and compliance with the Consumer Duty by making it easier and faster to make a claim. This is something we’ll continue to monitor and report on over time.

Like so many of his peers in the insurance marketplace, it was chance and circumstance that brought Steven Moore (pictured), head of professional indemnity & professional lines – specialty at AmTrust International, to the professional lines insurance sector. Some 30 years later, he has seen the market through good times and tough times alike, and his passion for professional lines remains undiminished.

With previous credits including 17 years at RSA, Moore has seen first-hand the difference between working for a large corporate and a specialty lines underwriting business. His time with the former provided a “great foundation”, he said, but he’s relishing the decision-making responsibilities that come with his present role.

“What I really enjoy most about working at AmTrust is that you’re empowered to make decisions quickly,” he said. “That specialist lines approach means you’re always focused on your class. We’re very customer-orientated so we’re always listening to what the customer wants and trying to provide solutions to the market. And there’s no broader corporate strategic agenda sitting behind that – so if you come up with a good idea, you’re supported to bring that to the market as quickly and efficiently as possible.”

Professional lines insurance – what sets it apart?

Moore noted that what’s kept his interest in professional lines alive is the variety of individuals and businesses he has the opportunity to interact with and support on a daily basis. Whether they’re accountants, surveyors or engineers, each professional line has an ever-changing risk profile which requires continual research and analysis. Often that’s quite complex to navigate, which means it’s a very hands-on line of business, he said, and one which gives him the chance to speak to a lot of very interesting customers.

“Actually, that’s the fun part of the job,” he said. “Often, you only have to ask one question, and then someone can talk for an hour about what they do. You don’t need a piece of paper to bring professional lines insurance to life which is what I really enjoy about it. And as a class, it’s well-established now but that doesn’t mean there aren’t always new challenges coming along.”

Examining some of those challenges, Moore highlighted how external market conditions are impacting the sector. The economy is always an issue for the class, he said, and AmTrust monitors that very closely. Each recessionary period is different in terms of the respective roles and responsibilities of various stakeholders including the banks, the government and the regulator.

“For us, it’s about negotiating how our customers respond to that environment and the changing claims landscape as well,” he said. “Because that changes in an economic downturn with fraud increases, etc. The economy is a real concern to everyone and to businesses as well, and we appreciate that affordability can become an issue. We’re very aware of that and we respond where we can to assist in that. But it’s an interesting time for professional lines because it’s where the power of really good strong underwriting experience comes through.”

Leveraging relationships to create a sustainable professional lines insurance market

Professional lines and professional indemnity are always very relationship-driven classes of business, he said, but this only becomes more applicable amid challenging market conditions. When you have strong and long-standing relationships with a customer, you have to look for every opportunity to add more value to that relationship.

There’s a two-way strength to that partnership approach, he said, having a longer-term relationship means that the insurer understands and trusts you. That makes them more likely to respond to the pinch points facing a business and make concessions wherever possible – if not through premium, then potentially giving some coverage back or changing up the payment method.

“The importance of these relationships to the customer is reflected in the business meetings that we have,” he said. “Quite often we’ll see the CEO, the CFO in those meetings because they recognise that, for a professional, it’s a big cost but also that it’s a relationship that needs to be nurtured and protected.

“What they don’t want is someone who’s going to walk away the moment you have a problem. You want someone who’s going to be supportive and also experienced enough to help you through the process of a claim. Because it’s stressful for the professional that is going through it.”

Where brokers sit in the professional lines insurance ecosystem

While on the smaller end, brokers tend to be less invested in the relationship management aspect of this product line, he said, on the larger end the role of the broker in fostering and nurturing these strong relationships is critical. These brokers are involved throughout the entirety of the relationship, from bringing the risk to AmTrust’s attention, to putting the team in front of the customer, to explaining to the customer the terms of the coverage and why it’s so important.

“Brokers are particularly vital during difficult market conditions or when a client has had a claim,” he said. “They’re the ones best placed in assisting both the insurer and the client on understanding what happened, why it happened and what they can do to prevent it from happening again.

“It’s a really vital relationship which is why we focus on communicating with our broker. Because the easiest thing to say is ‘yes’ and the most difficult thing to say is ‘no’. But the important thing for me is when I say ‘no’, I give a reason. It’s not good enough just to say ‘no’, you need to give the customer and the broker an insight into why, as an insurer, you like the risk or you don’t.”

What’s next for AmTrust International?

Looking at what’s next on the growth agenda for AmTrust, Moore revealed that the business is actively exploring new opportunities to give out its capacity – which is why it recently joined the MGAA. With one eye fixed on the economy, he said, it’s looking at different sectors of the market. The business is already quite strong in the UK in certain sectors and would like to be stronger in Europe more generally.

“I think it’s about just taking the skills that we’ve got within the UK markets to build them out in other territories,” he said. “Despite writing $1 billion-plus of GWP outside North America in 2023, we’re not as well known as we’d like to be in the UK and Europe, and we’d like to get our name out there more by going to industry events, meeting people, and finding new ways to expand our presence.

“We’re open for business. We’re a big and a growing company… and we’re a real underwriting company that is prepared to back people, and which is looking to make it as easy as possible for people to work with us for the long term. The customers that we’ve got, we aim to keep for a long time – and hopefully, they aim to insure with us for a long time as well!”

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