Marsh
Timothy Marlin, senior vice president in Cyber Practice for US and Canada at Marsh, talks about the structure and operating model of Edgware Re group captive
Marsh launched its group captive Edgware Re in March, focusing solely on cyber insurance, to provide organisations with enhanced control and stability in their cyber programmes.
Based in Bermuda, Edgware Re only transacts business with its members, allowing participants to purchase up to US$10 million in (re)insurance based on their needs. The captive pools participants’ cyber risks and premiums, absorbs losses, and facilitates the exchange of cyber-security best practices among members.
As a captive insurance solution, how does Edgware Re’s structure and operating model enable participating organisations to more effectively manage their cyber risk exposure and optimise their insurance spend compared to traditional market offerings?
Edgware Re was created to meet the needs of financially stable companies, with strong cybersecurity hygiene, from diverse industries, that are looking for more stability, control, and contract certainty than what the current traditional cyber insurance market may provide. By pooling their risks and premiums and absorbing losses, the group captive provides additional pricing stability and control, potentially reducing market volatility.
The use of Marsh’s proprietary cyber insurance wording ensures contract certainty. Participants also benefit from strategic flexibility and economies of scale, as well as the sharing of cybersecurity best practices with like-minded organisations.
This innovative approach empowers organisations to better protect themselves in today’s evolving cyber threat landscape.
From an actuarial and risk management perspective, how does Edgware Re leverage data analytics, predictive modelling, and other advanced techniques to price cyber risks, set appropriate loss reserves, and ensure the long-term financial stability of the captive?
Oliver Wyman, a Marsh McLennan business, will leverage the proprietary Cyber Attritional Loss Model (CALM) from the Marsh McLennan Cyber Risk Intelligence Centre (CRIC) to provide actuarial services.
Working together with Marsh cyber brokers and using current market rates, they will calculate member premiums.
The underwriting approach will initially be conservative. Edgware Re’s goal is not to undercut market pricing, but rather to serve as a group captive that enables members to assume risk and potentially receive dividends in the future based on performance.
It does not aim to provide significant cost savings in comparison to the existing commercial market.
In terms of coverage, how does Edgware Re’s use of Marsh’s proprietary cyber policy forms allow for greater flexibility, customisation, and contract certainty compared to off-the-shelf cyber insurance products? What are the key differentiators in terms of scope, limits, and trigger mechanisms?
Edgware Re’s use of Marsh’s proprietary cyber policy forms allows for greater flexibility, customisation, and contract certainty compared to off-the-shelf cyber insurance products. Today, some commercial insurers are restricting cyber coverage, making it increasingly difficult for businesses to protect against the growing scale, severity, and frequency of cyber events.
In response to our clients’ evolving needs, we have enhanced our market-leading proprietary forms. Offering even broader protections for businesses seeking cyber coverage beyond typical privacy exposures, these forms are founded on the premise that, subject to applicable terms and conditions, cyber risks should be insurable — not excluded — by your insurance.
This tailored coverage aligns with each organisation’s unique risk profile, providing comprehensive protection against a wide range of cyber risks, including technology failures, data breaches, ransomware, and privacy regulations.
Can you discuss the captive’s approach to accumulating and sharing cybersecurity best practices and loss mitigation strategies among its participating members? How does this knowledge-exchange component enhance the overall value proposition?
Members of Edgware Re will form a Chief Information Security Officers Committee to, among other things, share best practices. By sharing insights and experiences, participants can gain valuable insights into emerging cyber threats and effective risk mitigation strategies from their best-in-class peers. This collective knowledge helps to strengthen all members’ cyber resilience and improves their ability to effectively manage and mitigate cyber risks.
From a corporate governance perspective, how are the decision-making processes and oversight responsibilities structured within Edgware Re to ensure alignment with the strategic interests and risk management objectives of its member organisations?Edgware Re operates with a board of directors who collectively make key decisions and provide strategic direction. This board composition allows for representation from different member organisations, ensuring diverse perspectives and alignment with their interests. Additionally, the board oversees captive management, including underwriting, claims advocacy, and incident response, to ensure effective risk management practices are in place.
This governance structure ensures that decisions and actions taken by Edgware Re are in line with the risk management objectives and strategic goals of its member organisations, providing them with confidence and control over their cyber insurance programmes.
What role do Marsh’s risk advisory capabilities, including its global cyber practice, play in supporting Edgware Re’s underwriting, claims management, and risk engineering functions, and how does Edgware Re’s reinsurance strategy utilise traditional reinsurance and alternative risk transfer mechanisms to optimise risk-bearing capacity and member value?
Marsh’s broader risk advisory capabilities, including its global cyber practice, play a crucial role in supporting the underwriting, claims management, and overall risk engineering functions of Edgware Re. As a leading insurance broker and risk advisor, Marsh brings extensive expertise, claims, market data, and industry knowledge to the table.
While Edgware Re’s risk-bearing capacity and strategy have been created based on significant feedback from prospective members to best deliver value from day one. As the company matures and grows, the members themselves will decide how best to update the reinsurance utilisation strategy.
How does Edgware Re’s cyber-only focus and participant eligibility criteria, which exclude certain high-risk industries, contribute to its ability to maintain underwriting discipline and achieve sustainable profitability over the long term?
By focusing exclusively on cyber risks, Edgware Re can develop a deep understanding of the unique challenges and dynamics of the cyber insurance market. This specialised focus allows for more accurate risk assessment, pricing, and underwriting practices tailored specifically to cyber risks. It enables Edgware Re to allocate its resources and expertise efficiently, ensuring a disciplined approach to underwriting cyber insurance policies.
By carefully selecting participants with strong cyber hygiene and robust risk management practices, Edgware Re can mitigate the potential for adverse selection and concentration of risk. This approach helps maintain a balanced and diversified portfolio, reducing the likelihood of catastrophic losses and promoting sustainable profitability.
Looking ahead, what are the key areas of innovation and expansion that Marsh is exploring to further enhance Edgware Re’s capabilities and ensure it remains a cutting-edge solution for organisations seeking to proactively manage their cyber risks?
Ultimately, Edgware Re is controlled and governed by its members. The members of the group captive will control further innovations and enhancements to the coverage and capabilities offered.
This could include such enhancements as additional capacity or the addition of technology error and omission coverage as the company grows.
Marsh’s Cyber Practice and Captive Solutions will continue to advise the members so that they are aware of changing marking conditions and innovations.
