New Coalition insurer 'to provide as much cyber capacity as needed'

Cyber underwriter Coalition has placed no limits on the amount of capacity it can provide to the admitted US market through its new insurance company.

Coalition head of insurance, Shawn Ram, said the new carrier could provide “as much [capacity] as needed”.

Speaking to Insurance Day, Ram said the launch of a rated insurance company would give Coalition more control over how much capacity it put into the market, adding it will “utilise the reinsurance marketplace as needed”.

“Capacity in London is constantly discussed because of the way Lloyd’s works. You have this annual renewal process, you have a defined amount of capacity. However, company markets – or in this case our own insurance company – we don’t have limitations in that regard.”

Ram added: “We plan to set growth goals and work towards achieving those goals. We’ve raised more than $700m, we’ve been highly efficient with cash and so our ability to leverage our own capital enables us to do things like this.”

Earlier this week the US cyber specialist announced the launch of Coalition Insurance Company (CIC), a wholly owned admitted insurance carrier that will provide the underwriter’s cyber insurance product targeted at small and medium-sized enterprises (SMEs).

The insurer, which received an A- rating from AM Best, is expected to start writing business in about 30 US states later this quarter, with a nationwide rollout expected throughout 2023.

CIC will target SMEs, a market traditionally underserved by cyber insurers, with its “active insurance” product, which continuously monitors policyholders for cyber vulnerabilities, alongside its insurance coverage.

The new insurance company will run parallel to Coalition’s managing general agent (MGA), giving brokers the choice of admitted or non-admitted products.

“Everything we’re doing from the MGA business we’ll continue to do. Brokers who desire an admitted product, who desire the coverages and rating model available through that product, they’ll have that option [through CIC],” Ram said.

By creating an admitted carrier, Coalition would have more control over the policies it writes and would be able to distribute its product through a broader range of brokers, Ram said. “Our ability to provide enhanced coverages, innovative coverages, further integrate the active insurance model into the policy language – all of those things provide us greater flexibility and greater value to the policyholder through the admitted product.”

“Our ability to provide enhanced coverages, innovative coverages, further integrate the active insurance model into the policy language – all of those things provide us greater flexibility and greater value to the policyholder through the admitted product”
^{Shawn Ram
Coalition}

He continued: “Admitted products are oftentimes used by brokers who don’t have surplus lines licences, brokers who desire to place smaller business, brokers who value tremendous speed and efficiency. Our admitted product is able to provide that in a really unique fashion.”

Admitted products can also face fewer regulatory barriers – for example, most US states a require a risk be declined by multiple admitted carriers before it can be placed as a non-admitted policy, which Ram said is a barrier to scaling programmes.

There are disadvantages as well. An admitted policy cannot be altered once approved by state regulators, meaning if an insurer wants to change its rating plan, pricing methodology or coverage – for example because a new cyber threat has emerged – the whole policy needs to be refiled. This process can take months, depending on the state.

“The dynamic nature of cyber sometimes has challenges with admitted markets and that’s the reason why most cyber at a certain level – larger accounts and so on – are placed in non-admitted markets, meaning you don’t have to file with the state, you have complete flexibility around pricing and coverage,” Ram said.

“The flip side is the distribution side, which was a great advantage of admitted,” he added.