Axis Capital’s Bailey: Capital returning to cyber market following return to profitability

A resurgence in ransomware claims over the past 18 to 24 months has prompted a significant hike in rates for cyber exposures amid constraints on capital supply.

But capacity is now becoming increasingly plentiful following a return to profitability among cyber insurers, according to Axis Capital’s Lori Bailey.

Bailey, who joined Axis to lead its global cyber and technology team in June last year, told The Insurer TV: “On the direct side, we are seeing line sizes begin to come up again. Where previously they were being brought down to manage capacity much more closely, they are now

beginning to increase as companies and markets are beginning to return to a place of profitability.

“On the reinsurance side, we've seen many companies are beginning to take their quota shares down, which is leading to an increase in supply in the market.”

Bailey said the introduction of ILS capital and cat bonds to the market – Axis sponsored the first cyber-focused 144A cat bond placement late last year – was also increasing capacity supply on the reinsurance side.

“We know that the cyber market is going to continue to grow. And we were certainly very constrained in the existing reinsurance space with the capital that was there. In order for the market to reach its true potential, we recognised the need to introduce new sources of capital to the market,” she added.

Rate fluctuations

Bailey acknowledged there were signs of slowing in some parts of the cyber market – most notably on excess placements, but also in the SME segment – and highlighted the importance of focusing on price adequacy amid rate fluctuations.

“We are continuing to watch rates very closely, and we have seen a few indicators that they may begin to slow down in 2024.

“A lot of that will depend on the claims environment, and how some of the claims reported over the past 18 to 24 months continue to trend.”

Watch the full 10-minute video with Lori Bailey to hear more about: