Capsicum Re’s Rupert Swallow says the cyber reinsurance market is “vibrant and growing”

The cyber reinsurance market is growing fast and will soon rank alongside property and casualty.

This is according to Capsicum Re chief executive and co-founder Rupert Swallow, who says that recent events have shown that risks are not limited by geographic location.

Swallow highlighted the 2017 global “NotPetya” ransomware attack as being an event which changed not only perceptions of the magnitude of non-affirmative cyber, but also its nature as a genuine multiline peril.

“The attack indiscriminately hit sectors from banking to pharmaceuticals to shipping,” said Swallow.

“NotPetya clearly revealed the potential for very large multinational, multi-line, non-affirmative cyber losses to accumulate on the books of reinsurers, which if retained could leave them in a materially different financial position.”

Among Capsicum’s cyber reinsurance broking credentials, Swallow claims it has completed the world’s first and only industry loss warranty for cyber risk, built the largest cyber consortia for large industrials and placed the largest ever cyber facility aimed at the healthcare sector.

He appreciated there are currently challenges in the market. But he said he preferred to view these as opportunities.

“Some might view overcapacity, driven by hedge funds and ILS markets, as a challenge for the reinsurance market but I see it as a huge opportunity,” said Swallow. “The ILS market has played a key role in redefining the re/insurance marketplace. This source of capital has developed into a reliable capital base for the transfer of catastrophe risk among today’s reinsurers.”

He added: “ILS funds were able to re-capitalise in Q4 2017 and deliver their product seamlessly at 1 January 2018.

“As the ILS community broadens its appetite away from cat perils and looks to access a diversifying portfolio, London is the obvious next step not just geographically, but also from a business perspective.”

Grahame ‘Chily’ Chilton is returning to help lead this journey. It was announced in June he would be stepping down from his role as UK chief executive of Gallagher to return to the reinsurance broker.

Chilton founded and developed the Benfield Group, and he is the former chairman of Aon Benfield.

In 2013 he co-founded Capsicum Re with Swallow.

Swallow said: “We are looking forward to having Chily return to Capsicum Re and benefitting from his expertise and experience both as a sales leader and the relationship manager of our joint venture with Gallagher.

“Together we will work to drive global business development, help shape the strategic direction of the company and maximise the business’ further growth potential.”

Capsicum Re was born out of the fierce competition in reinsurance broking. Swallow said it formed “to challenge the status quo” and that it has subsequently been able to thrive by following its core values, particularly that of advocacy.

Within just three years of trading, Capsicum Re broke into the top ten reinsurance brokers in the world. And Swallow said he was looking to continue challenging the larger reinsurance brokers in the market.

“Ultimately, competition benefits the customer,” he said. “The components of a successful transaction are a satisfied broker, a satisfied client and a satisfied market – when all three entities are satisfied then you have created a long-lasting relationship-based reinsurance contract, which will withstand the vagaries of the market.

“This feels like a healthy position to be in and we must be careful that the market remains competitive enough to allow this situation to take place.”

With both co-founders now back at the business, Swallow said he was looking forward to helping clients and following through on its business model around customer relationships.

He said: “The relentless advocacy of client interests is our sole purpose and relationships are at the very heart of our business.

“We specialise in challenges so when something other than vanilla is required we have it covered.

“Our unique business structure fosters an entrepreneurial environment that attracts the most talented reinsurance intermediaries in the market.

“With the best talent we can challenge the market and provide customer-centric solutions in all reinsurance classes.”