Brokering Behind the Firewall with Alexandra Bretschneider

Anthony: How did you get started in cyber insurance?

Alexandra: My journey into cyber insurance began with a background in IT consulting. After majoring in MIS and finance in college, I embarked on a career path that led me through IT advisory at Ernst and Young, followed by telecom consulting. In 2015, I transitioned into the insurance industry, focusing on commercial property and casualty insurance from the outset. My interest in cyber insurance grew naturally from my background, prompting me to concentrate in this area. This focus became increasingly relevant as cyber insurance evolved significantly from 2020 to 2023, positioning me to assist our clients through a challenging market and enhance their cybersecurity measures. It's been an engaging and fulfilling journey.

Anthony: Can you see the cyber broker role extending into a virtual CISO for companies?

Alexandra: Absolutely, the evolution of the cyber broker role into something akin to a virtual CISO is something I've been contemplating. At its core, our role as brokers is to serve as risk management advisors. This function has increasingly begun to overlap with aspects of cybersecurity consulting. While most brokers currently may not possess the comprehensive expertise to replace a dedicated cybersecurity consultant or a virtual CISO, the possibility of brokers offering such services, possibly through contracted specialists, is becoming more plausible. In a manner similar to how we provide safety services in other insurance lines, I anticipate cyber brokers will increasingly offer consultative risk management support, potentially evolving towards virtual CISO services.

Anthony: What do you think separates the good cyber brokers from the great ones?

Alexandra: The distinction between good and great cyber brokers hinges on their ability to remain relevant and hands-on. Staying relevant involves a constant vigilance over the evolving landscape of cyber and privacy laws, understanding litigation trends, and keeping abreast of data trends. Additionally, it's crucial for brokers to grasp the intricacies of insurance coverage and tailor their knowledge to the specific needs of different organizations. Being hands-on means actively engaging in incident response, learning from these experiences, and ensuring policies respond as intended, thereby managing expectations effectively and facilitating the learning process from each incident.

Anthony: What resources have you found helpful in staying relevant and hands-on?

Alexandra: To stay informed and relevant, I immerse myself in a wide range of publications and updates from various sectors including legal, cybersecurity, and insurance. This daily reading habit allows me to capture insights from multiple perspectives, enriching my understanding and approach to cyber insurance.

Anthony: What publications have you found most helpful?

Alexandra: I find a variety of publications instrumental in keeping me informed, including Law 360, Law.com, Business Insurance, Zywave, and Insurance Journal. Additionally, I follow updates from law firms like Constangy and Troutman Pepper, and I also value the insights and data provided by forensic firms such as Arete and Kroll and cybersecurity publications like Data Breach Today. These resources are vital in helping me stay ahead in the rapidly evolving cyber insurance landscape.

Anthony: What do you think is preventing inside-out underwriting from reaching its full potential, and how can we overcome this?

Alexandra: The adoption of inside-out underwriting faces several obstacles, including businesses' reluctance to allow external access to their networks and a general skepticism towards insurance companies. Moreover, the lack of compelling incentives has made businesses hesitant to embrace this approach. Market volatility and the pursuit of competitive coverage without extensive underwriting requirements have also played a role. However, I believe that as market conditions evolve and if incentives become more aligned with effective underwriting and meaningful coverage benefits, we might witness a shift towards greater openness to inside-out underwriting.

Anthony: How do you think breakthroughs in AI will impact the cyber insurance market?

Alexandra: AI's impact on the cyber insurance market is twofold, offering advancements in threat intelligence and detection that could make organizations adopting such technologies more favorable risks. However, the potential for AI to be used for criminal purposes adds a layer of complexity to risk assessment. Balancing the benefits and risks associated with AI will be crucial in determining its overall impact on the market.

Anthony: How can AI assist brokers in their workflows?

Alexandra: AI has the potential to revolutionize broker workflows by facilitating quicker negotiation of coverage terms and streamlining policy analysis. This technology could enable brokers to focus on critical aspects of coverage more efficiently, enhancing the service provided to clients. Moreover, AI could assist in underwriting processes by gathering comprehensive data on organizations, thereby improving risk assessments and potentially influencing the adoption of inside-out underwriting models.

Anthony: For the rest of 2024, how do you see the cyber insurance market evolving?

Alexandra: Looking ahead, the cyber insurance market is poised for tighter conditions, driven by the increasing prevalence of ransomware, email compromises, and funds transfer fraud. These challenges are likely to exert upward pressure on loss ratios, indicating more difficult market conditions on the horizon.

Anthony: Why is there a lag in premium prices following the rise in ransomware incidents?

Alexandra: The lag in adjusting premium prices in response to the surge in ransomware incidents can be attributed to the intricate dynamics of analyzing incident data, competitive market forces, and the strategic considerations of insurers as they navigate market share and pricing strategies. Insurers must balance the need to accurately reflect risk in their pricing with the competitive landscape, which often delays immediate adjustments to premiums. Additionally, the industry must reach a consensus on rate adjustments to avoid losing business to competitors offering lower rates. This necessitates a coordinated approach among insurers to manage the impact of ransomware and other cyber threats effectively.

Anthony: What's one piece of advice you would like to share with brokers who want to enter the cyber market and become that cyber risk advisor to their clients?

Alexandra: For brokers aspiring to enter the cyber market, my primary piece of advice is to embrace continuous learning and curiosity about technology and cybersecurity. Understanding the technical aspects of cybersecurity is not just beneficial but essential for advising clients effectively. This means engaging with IT professionals, asking detailed questions of underwriters about what security controls they prioritize and why, and pursuing knowledge fearlessly. The technology landscape is complex and can be intimidating, but with a dedicated approach to learning and understanding, brokers can become invaluable advisors to their clients in navigating cyber risks.

Anthony: Amazing. Alexandra, thank you so much for your insights and for sharing your expertise with us.

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