Gallagher Re has launched their Cyber-Risk Adjusted Rating Index, a measure of the change in reinsurance prices adjusted for expected changes to the underlying level of risk.

The company said that unlike property where limit is directly correlated to risk, a cyber reinsurance rating index requires use of a proprietary view of risk which includes considerations for underlying rate change, loss trend, selection of volatility parameters and catastrophe model selection.

The consistency of approach, the company said, enables the credible tracking of the reinsurance rating environment year on year.

Ian Newman, global head of cyber, commented: "While it has performed well in recent years, the cyber market continues to grow and the risk landscape is evolving rapidly.

“Cyber is also a ‘cat’ [catastrophic event] and systemically exposed class and reinsurance buyers are constantly looking for suitable and effectively priced non-proportional protection.

“Gallagher Re therefore believe that over the long-term, an index of the cyber aggregate excess of loss market will provide a useful and insightful barometer as to the state of the cyber reinsurance rating environment.”

Gallagher said they are the pre-eminent cyber reinsurance broker, committed to working with both cedants and markets to develop and deliver effective reinsurance solutions that solve for the specific concerns of our clients.

They fully expect both per occurrence and per risk solutions to become an increasingly prominent part of the non-proportional risk transfer landscape.

“However,” they stated, “isolating and protecting purely against cyber cat losses via event/occurrence based solutions remains a nascent, highly nuanced and inconsistently priced part of the reinsurance product landscape not least due to the variation in event definitions and coverage but also differences in views of tail-risk between cedants and reinsurers, all compounded by a lack of historical event loss data points and a rapidly evolving [insurance and] reinsurance market.

“It is no surprise therefore that since their introduction in ~2015, aggregate stop-loss and aggregate excess of loss structures have become the non-proportional solution of choice for the majority of cyber reinsurance buyers.

“Well-designed aggregate products provide the optimal solution for those cedants looking for asymmetric protection against either a highly adverse loss trend [such as that seen with the rise of ransomware 2018-2021], a frequency of event losses, and/or a single catastrophic or systemic event.

“The aggregate market also continues to be the most well capitalised part of the non-proportional cyber reinsurance market and experiences the least variation in pricing views across quoting reinsurance market participants making it the most appropriate basis for an industry wide pricing index.”