Resilience’s Vitale: Partnering with incumbent industry critical to success in cyber

Resilience president Mario Vitale has said it is critical for cyber insurtechs to partner with the incumbent industry rather than purely looking to disrupt the sector, noting that the cybersecurity and insurance segments in many cases continue to operate in silos.

Vitale spoke with The Insurer TV on the sidelines of this week’s RISKWORLD conference hosted by RIMS in San Diego, also commenting that capacity providers are discriminating between the best and worst performers in allocating capacity.

Vitale contrasted the approach taken by cyber insurtechs – which have virtually all started out as MGAs supported by capacity from the incumbent industry – with their personal lines counterparts, which have made disrupting the incumbent industry a part of their business model from the outset.

“By definition, for me, in cyber, unlike some personal line products, cyber has always needed to have a partner, a balance sheet partner. But a true partner means there's profitability for both parties, and then the ultimate client gets the best service,” Vitale explained.

“Now, not all cyber MGAs have been kind to their risk transfer partners – a lot have lost money. I believe that part of the secret is to have a like-minded partnership, have skin in the game, if you will, and to make money with it,” Vitale commented.

Resilience has had a longstanding capacity relationship with Canadian insurer Intact, which has also provided the insurtech with equity financing.

“To that extent, it's about partnership,” Vitale said, though he declined to elaborate on the outlook for cyber insurtechs to be acquired by incumbents after Corvus was purchased by Travelers earlier this year.

“What I can say about us is that that partnership is absolutely essential. We are good at what we do, which is cybersecurity, the very best in the world for our clients, and delivering on that service,” he noted, citing underwriting, actuarial and claim servicing as key to its value proposition.

“We don't intend to replace the balance sheet risk transfer of insurance companies. They do that best and they know they do that best, and that will require a strong partner,” he commented.

“That partnership will last over a very long time, if everybody makes money, and that's our intention,” he explained.

Silos in cybersecurity, risk management and insurance

Vitale said Resilience’s insurance business was launched four years ago “with the clear goal of achieving something that had never been done before”, by marrying cybersecurity with cyber insurance, saying both need to be paired in a “totally integrated approach”.

“In many places still today, it's different silos – silos in security, silos in risk management, silos in insurance. An integrated approach is the only way to keep clients truly safe,” he commented, noting that Resilience is constantly scanning for threats and monitoring threat intelligence.

Vitale called the cyber market “large” and “growing”, where the volume of losses “are growing exponentially all the time” as he painted a picture of the cyber segment as consisting of large multi-line insurers, multi-line MGAs, and purely cyber-focused MGAs.

He said that capacity provided by balance sheet firms is “discriminating” and only willing to support MGAs with the best loss ratios.

“We happen to have one of the best, if not the single best, in the middle-market and large accounts, so [getting capacity] is easy for us,” he noted, though he acknowledged that significant rate increases, coverage restrictions and better security have attracted more capacity.

“It's a complex world out there, but certainly the markets are discriminating these days [between] the better performers and those that I would say were average or below average,” he noted.

Resilience, Vitale noted, has been expanding both vertically and horizontally, as its commenced operations in Canada, London, and continental Europe, launched a tech E&O product, and raised the limit it is willing to deploy and the size of insureds it is willing to cover.

Threat actors increasingly focused on “big game hunting”

Discussing market conditions, Vitale said the number of breaches this year “are way up” and that threat actors are going “big game hunting” as they target increasingly larger potential victims.

“If you look at the MOVEit situation, where [the threat actors] go after a very large software company with a lot of vulnerabilities that had thousands and thousands of clients, that's a very ‘up game’ kind of attack,” he commented, while also pointing to the Change Healthcare attack.

“It's also a very vulnerable market. A very large loss to the industry, to the reinsurers, one that is systemic in nature, makes it very, very vulnerable,” he said of the potentially “systemic” nature of the Change Healthcare event.

“Pricing and underwriting discipline needs to remain in place, but a large event, that causes a very large loss, could kind of tilt [the market], if you will, just the opposite way,” Vitale continued.

With the potential of ever-larger breaches on the horizon, Vitale said market conditions could “change at any moment” and that “discipline is the best way to operate through it for everybody and for the predictability for our clients”.

“But I think that, sometime in the foreseeable future, there'll be enough pain coming through the marketplace [in terms of] losses, [and] that will be an argument for not only staying disciplined, but firming, because we just don't know what the impact of some of these major big game losses might end up being,” Vitale concluded.

Watch the full interview with Resilience’s president Mario Vitale to hear more on: