Tokio Marine Kiln plots Europe cyber growth

As Europe faces growth in demand for cyber coverage driven by growing fears around business interruption risks related to cyber events, Tokio Marine Kiln is preparing to expand its business on the continent.

Tokio Marine Kiln has selected the German-speaking countries—Germany, Austria and Switzerland—as they are powerful economies with a lot of IT-based businesses. But this is likely to be only the beginning.

“We want to become one of the market leaders for cyber in Europe,” said Markus English, enterprise risk underwriting manager, marine & enterprise risk at Tokio Marine Kiln.

“The UK is around two years ahead in terms of its development of cyber risk compared to continental Europe, not least because carriers have been writing US business from the UK,” English explained.

The US is the most developed cyber insurance market in the world and capacity had been showing signs of exhaustion, opening up opportunities for UK-based carriers.

“Unlike the US where cyber insurance growth has been driven by third-party liability, European growth in cyber is driven by first-party insurance, offering business interruption cover,” he said.

Cyber risk is perceived as one of the few potential drivers of growth in the re/insurance industry. It is, however, difficult to gauge the risk in cyber and price the cover accordingly. “We have to make sure that we insure what we understand,” he added.

English believes that Tokio Marine Kiln has found the right approach to providing cyber coverage to businesses in Europe and that the carrier has sufficient controls in place to avoid large losses.

“We have to control the limits involved and of course how good the prevention measures in place are for every policyholder to be protected against cyber attacks,” he said.

Insurers also have to control their aggregations, which means having good underwriting in place and also the right reinsurance coverage.

“Tokio Marine Kiln is insuring business interruption risk which involves forensic cost as well as cost for restoring data. The premium is linked to the annual revenues of a company,” he suggested.

Tokio Marine Kiln buys reinsurance on a one-year treaty basis.
“At the moment reinsurers are pretty relaxed in giving capacity,” English said. “Everybody who has capital left and wants to invest in insurance is interested in cyber.”

As it is a comparatively new risk, insurers such as Tokio Marine Kiln are learning as they go along. For example Tokio Marine Kiln recently paid out a six-digit amount on a German claim where it acted as co-insurer. The company, which offers online microfinance, had been infected by a virus and the complete IT system had to be stopped, shutting down the business for more than 30 days.

“There were costs to investigate what was going on, to clean up the systems and business interruption costs,” English said.

The client was happy with the way its insurers reacted and supported it, but had to accept an increase in premium as it was no longer claim-free. For Tokio Marine Kiln it showed that the risk of the client was higher than previously thought, potentially requiring the insurer to adapt the model used to underwrite the risk.