The digital economy has undergone tremendous transformations over the last few years. As a result, organizations large and small can no longer ignore digital risks that can quickly transform into adverse cyber incidents. Over the next decade and beyond, the most successful brokers will need to be prepared to help their clients navigate these complex risks. We created the "Cyber Savvy Broker" series to highlight forward-thinking brokers with the knowledge and skills to help their clients weather this digital transformation.
Richard Fernandez, EVP of Amwins, has more than 20 years of experience in the industry and became an early adopter of cyber insurance over ten years ago. Richard shares his view of how the cyber insurance market has changed, why patience is essential and why staying on top of current trends is the best way to protect his clients. Read his full thoughts below.
How did you become an insurance/cyber specialist, and what has changed the most since you started?
Cyber is something that found me. I spent the first ten years of my career at AIG and was a Financial Institutions and Directors and Officers (FI/D&O) specialist during that time. Cyber was not a big focus in my early years at Amwins, which began in 2006. Miscellaneous Professional Liability (MPL) was an area that was big in wholesale. I began to see more and more MPL risks, and cyber was just a good companion line. We also began doing a lot of private equity business, and they are big buyers of insurance. As cyber began to emerge as a prominent threat, they were early buyers for their portfolio companies and deals really started to flow in around 2010-2011.
The biggest change since the time I started was initially the rapid broadening of coverage and then subsequent tightening of coverage over the past year or so. It was a decade of figuring out how to make cyber a commercially viable product, followed by almost an unprecedented contraction in the last 18 months. Secondly, it’s how technical cyber has become.
We have to have a much better understanding of network security controls than we ever did in the past. It is no longer good enough to understand the mechanics of the policy and the marketplace, we also have to be a consultant to our retailers and insureds and help them get their house in order so they can get terms.
What are some key skills that are essential to have in the current market landscape?
I think that patience, lots of patience, is critical in this marketplace. Many factors are conspiring against underwriters, brokers, and insureds. The time cycle of a deal is double or triple what it was just a few years ago. Underwriters are asking a lot more questions about the insured’s security posture. Accounts are moving from the incumbents like no other time I can remember. We are seeing more declinations and non-renewals, so that is causing us to approach more markets than ever before. This obviously means more opportunities than ever, but also more deals for each underwriter to sift through. It’s coupled with many shops operating at below ideal staffing levels. We have become acutely aware of underwriters burning out, and we are doing our best to manage the flow as best as we can. I think now, more than ever, it is critical to have strong relationships with your underwriters. The brokers who saturate the marketplace are unnecessarily demanding, and as a result of their lack of bind orders, they are being tuned out. I frequently tell my team that we need to mind our tone even when we are frustrated. Everyone has a tough job nowadays.
What are the most challenging aspects of the insurance market today, and how have you navigated those as a broker?
It is amazing to me that for so many years as a cyber broker, value-added services were being offered, and the uptake rate was always so low. Likely below 10 to 20%. As we have moved into a hard market cycle, services such as phishing, mock tabletop exercises, password management, and disaster recovery are so valuable to these companies and how they run their business to avoid prolonged periods of downtime. Cyber is not a static line. Changes are occurring in real-time. Insurance brokers need partners who are consultative and up-to-date on the latest trends and threats like Coalition. Being able to remediate an open port or even let the insured know there is one, as we have done many times with Coalition, reduces the insured's risk gives them a feeling of comfort that they have an extra set of eyes covering their business.
The days of issuing a policy and waiting for a claim to occur are long gone. Business is being conducted differently today, and we need partners who are proactive and consultative.
Cyber insurance is a key factor in addressing and mitigating cyber risk and can save your business time and money in the event of a cyber incident. If you’re looking to grow your cyber portfolio and would like to help your clients get ahead of their digital risks, get appointed with Coalition.