CFC’s Phillips forecasts further cyber rate declines in 2025
Cyber insurance rates will continue to decrease heading into 2025, with the reductions driven by continued market softness and heightened competition, CFC’s Michael Phillips has told The Insurer TV.
Barring a major event, Phillips, CFC’s US cyber practice leader, does not think the current cyber market trajectory is going to change.
As Phillips noted, while the CrowdStrike outage did underscore some issues, it did not fundamentally shift the sector.
“The CrowdStrike outage didn't really pivot the market in any great way, although it highlighted system failure risk and software supply chain risks, which have been good for speaking to the client base,” Phillips said during the NetDiligence conference in Philadelphia.
“But I don't see any changes soon, and I think we're going to see steady rate declines through the end of the year and into next year,” he added.
In a softening environment, Phillips emphasized that CFC, an MGA initially focused on cyber but which now writes other lines too, is focused on distinguishing its service offerings.
That effort, in part, lends to helping educate not only clients but also capital providers and the entire industry about the evolving landscape of cyber risks and the importance of value-added services.
“CFC has made some extraordinary investments in cyber threat intelligence,” Phillips said.
“[It’s] really the promise to protect our clients, in addition to the promise to pay them if something terrible goes wrong.”
Phillips said there is growing confidence among cyber insurers in getting to grips with attritional losses.
“We are getting much better at understanding the attritional losses that businesses face every day,” Phillips said. “We know how to price that risk. We know what to assess from a risk management perspective.”
But more work needs to be done to understand catastrophic cyber losses, he noted.
“I don't want to wait for that bad thing to happen, for us to turn the corner [on modeling] and make sure that we're delivering for clients small, medium and large.”
AI impact
As with many other industries, AI has been at the top of the agenda for many insurance service providers.
“We're seeing every business is trying to figure out where they sit in the AI food chain, and what they can do to deploy it,” said Phillips.
“So, I think about it from the point of view of every client is going to be using AI, and what does that mean from a cyber risk perspective as well as a tech errors and omissions perspective.”
Phillips believes AI, despite its potential benefits, could also be worrisome given the ample bad actors looking to take advantage wherever possible.
“The bad guys are also using artificial intelligence every day,” Phillips noted.
“Whether that's to drive social engineering attacks, make their phishing email campaigns much more persuasive than they used to do, the pig-butchering love scams that we see every day – I worry about how bad guys can use these tools as well,” said Phillips.
Watch the 12-minute interview with Phillips to hear more on how CFC is approaching clients in a softening market and attritional losses