Cyber security posture improves, market shifts

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Increased regulatory enforcement and civil lawsuits have cyber insurance leaders like Michael Colford sounding the alarm for insureds to remain vigilant about protecting the privacy of their customers’ data

“THE THREAT landscape continues to change,” says Michael Colford, senior vice president, cyber product leader at Westfield Specialty. “Now is a good time for brokers to take a holistic view of their clients’ cyber risk.” There has been a “disruption to the ransomware threats supply chain, most notably due to the Russia/Ukraine conflict, with many bad actors focused elsewhere,” he adds. The severity of ransomware claims has lessened to some extent, although the threat still exists. “From my perspective, one of the biggest changes we have noticed over the past few months is that after a few years of enduring a hard market in the cyber insurance space, driven in part by ransomware claims activity, the market seems to be stabilizing,” Colford says. “We can attribute some of the stabilization to a slowdown in ransomware claims.”

Westfield was founded in 1848 by a small group of hard-working farmers who believed in the promise of the future and the power of the individual. Today, 175 years later, as a leading US-based property and casualty insurance company with $8.5 billion in GAAP assets, Westfield underwrites commercial, personal, surety, and specialty lines of coverage through a network of over 1,000 leading independent agents and brokers. Westfield recently acquired Lloyd’s of London Syndicate 1200, establishing the company as a global franchise. Learn more at www.westfieldinsurance.com

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“It is important to partner with a carrier that is taking a long-term view of the market ... the role of the agent will be integral in helping insureds find the right home”

Michael Colford, Westfield Specialty

“Companies and insurance carriers have adapted to better address the cyber security controls that help protect against ransomware issues and network-based attacks,” Colford says. There is still concern, but the improvement of ransomware controls has allowed insureds to dedicate attention to other rising concerns, such as the privacy of their customers’ data.

With an increased level of attention on existing privacy laws and enforcement, a heightened area of focus has developed for insureds. Best practices for the protection of customers’ personal information collected online are now top of mind. Lawsuits and regulatory enforcement are on the rise, and with that come challenges for insureds and cyber insurance carriers. According to Colford, “Some of the recent trends we've seen in claims are around privacy-related issues, most notably around the Biometric Information Privacy Act [BIPA] out of Illinois, and similar regulations around the collection of biometric information. We've seen class-action litigation in the market, and we're seeing litigation around BIPA expand."

“It’s a focus of ours, from an underwriting perspective, to make sure we are asking the proper questions, not only around network security controls, but also around privacy-related issues,” says Colford. “When we look at our insureds, we want to make sure that there is proper coordination between the IT security team and the privacy team, and with the rise of claims around website tracking, we also look for the marketing teams to be involved.” Colford and his team urge clients to make sure that there is “cohesion” within their organization, to make sure everyone is on the same page about keeping user information secure.

Increased competition in the cyber insurance market this year has meant an expansion of capacity and stabilization of premiums.

“[I]nsureds’ cyber security posture has improved, and the cyber insurance market has helped advance the cyber resiliency of insureds to improve their insurability”

Michael Colford, Westfield Specialty

“We are certainly hammering home questions about compliance with the latest privacy regulations,” Colford says. “We are asking the appropriate questions so we are not caught off-guard. It is at the forefront of our underwriting.”

As the cyber product leader, Colford works closely with the cyber underwriting team and is helping them adapt to the rapidly changing environment. He collaborates closely with the team to set underwriting guidelines and best practices as the threat landscape changes. Colford warns that cyber criminals “continue to be more sophisticated.” As such, “it is important to partner with a carrier that is taking a long-term view of the market.” He says that “the role of the agent will be integral in helping insureds find the right home.”

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Published 3 May 2023

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“A lever is being pulled on pricing”

In addition to BIPA, there is increased attention to privacy concerns around website tracking technology, or marketing tags. Anyone who has ever clicked on an “accept all cookies” notice when visiting a website for the first time has an idea that something is up – information about their visit is being collected, stored, and shared. But who is storing this information, and with whom is it being shared? And do you, as a user, consent to this?

“The stabilization of the market has created a lot more competition,” Colford says. “That benefits the insurance carriers, and it certainly benefits the insureds. Competition is good for everybody in this space. A lever is being pulled on pricing, and at the same time we are seeing an expansion of coverage offerings.”

When the market hardened and capacity was reduced in the past, many organizations were not able to get coverage, or saw their coverage restricted and limits reduced. Since then, “insureds’ cyber security posture has improved, and the cyber insurance market has helped advance the cyber resiliency of insureds to improve their insurability,” notes Colford.

Jack Kuhn

Graham Evans

Westfield Specialty’s leadership team

Appointed in 2021, and in 2022 was inducted into the Insurance Business America Hall of Fame

A 35-year veteran of the London specialty insurance market. He has built and grown underwriting operations across Europe and Asia

Executive vice president and head of international insurance

President, Westfield Specialty

Westfield Specialty fast facts

Parent company:

Ohio Farmers

Founded:

2021

Number of employees:

160 US and 180 international

Premium written 2022:

$300 million