Control, capacity, and cost are the three major reasons that captive insurance companies are being utilised for cyber insurance coverage, according to Michael O’Malley, managing director at Strategic Risk Solutions.
Speaking on the ‘cyber insurance market: shaping the future’ panel at the Captive Insurance Companies Association (CICA) 2019 conference, O’Malley said that captives are increasingly being used to cover cyber liability.
He noted: “What is driving that often is control, capacity, and cost, like most coverage lines, those are traditionally the three forces that lead to captive use.”
“People think that of the perception of cyber as a low-frequency high severity risk a captive isn’t a good fit.”
“In our opinion, it is worth looking at the captive to access reinsurance capacity to solve that because you can manage retentions through reinsurance and exert some more control in that structure.”
Another panellist, Fred Eslami, associate director at A.M. Best, suggested that a large part of the growth in the cyber captive market space was through smaller companies.
He said: “The expansion of the market into small businesses will increase and will continue to increase over the next few years. Big companies already have coverages.”
