In the wake of several very public data breaches, concerns about cyber risk and the cost associated with it continue to rise. As industries familiarize themselves with cyber security insurance, the main questions companies have are: “What type of coverage is available?” and “What constitutes cyber theft?”

What Is Covered By CyBer seCurIty InsuranCe?

Many general liability insurance policies now include limited coverage for cyber crimes, however, a cyber security insurance policy is becoming a necessity to protect businesses against a growing list of cyber risks. Cyber policies typically include coverage for losses resulting from viruses, hackers and even misplaced laptops. Many cyber insurance policies also provide added coverage for copyright infringement, defamation and negligence, while also providing Enterprise Risk Management software and consulting services to prevent future liabilities.

the Future oF CyBer LIaBILIty InsuranCe

From major retail chain data breaches to the celebrity photo “Cloud debacle,” cyber crime is becoming a regular occurrence in the news. Years ago, the main cyber risk was a computer geek looking to pull a prank. Today, countries and organized crime are stealing trillions of dollars in data, personal information and intellectual property (Google: China F35).

The hardest part about pricing cyber insurance, from an actuarial perspective, is the lack of data and an abundance of unknown unknowns. Many insurers are reluctant to venture into this new high-demand market because the clients they want don’t think they need cyber insurance, and the highest-risk clients are all lined up around the block like an iPhone 7 release party.

Target and Home Depot were both targeted by malware attacks launched from Russia. After one of Target’s payment servers was compromised, the company failed to respond to alerts generated by their new $1.6-million malware detection system. Home Depot’s self-serve kiosks gave criminals access to millions of customers’ personal and financial information, and the data breach was discovered only after fraudulent charges were traced back to the retailer.

Both Target and Home Depot have multimillion-dollar cyber insurance policies that cover the cost of IT infrastructure fixes, public relations experts and credit monitoring. According to a March 2013 report from Marsh, cyber coverage demand increased 33 percent for all industries from 2011 to 2012 and it is likely to continue to rise as companies learn more about these products.

New payment methods like Chip and PIN cards will make these types of breaches obsolete, but the criminals always seem to be a few steps ahead, while companies are hesitant to adopt new technology.

As cyber insurance providers like AIG, Chubb, Marsh and Travelers become more competitive with their products, software and support, these data breaches will have less financial impact on their clients. When we pass that milestone, the cost-benefit curve will undoubtedly make cyber insurance a standard policy for large and small business.

By Tom Troceen, Chief Technology Officer & Genevieve Shannon, Social Media Specialist

Volume 4, Issue 4 – Fourth Quarter 2014

800-837-8338 / 312-867-2300 actuaries@dwsimpson.com www.dwsimpson.com

What is Cyber Theft? Cyber theft simply refers to the unauthorized access to sensitive data (financial, personal, etc.) via the Internet, malicious software or other corrupted computer networks.

What is Cyber Security? Cyber security is an evolving checklist of software, procedures and user permissions to insure that all sensitive information is secure and compartmentalized to minimize losses in the event of a data breach.

cyber risk & data security in today’s global market

800-837-8338 / 312-867-2300 actuaries@dwsimpson.com www.dwsimpson.com

alternative capital in reinsurance

Alternative capital has been, and continues to be, a hot topic in reinsurance, as hedge funds and pension funds have flooded the market with capacity, increasing competition and creating downward pressure on rates (particularly in property catastrophe). According to Aon Benfield, the amount of alternative capital in the reinsurance marketplace increased by 18 percent to reach $59 billion in the first half of 2014, accounting for more than 10 percent of total global reinsurance capital.

Low interest rates have encouraged new participants seeking higher investment returns and hedge fund investors have established reinsurance companies, primarily in Bermuda, to benefit from tax advantages. Many pension funds, which traditionally participated in the equity markets, have invested in insurance-linked securities such as catastrophe bonds. Furthermore, insurers are on stronger financial footing and more capable of retaining risk and, as a result, they are reducing the amount of reinsurance they purchase.

The combination of fewer cat losses, increased capacity from the alternative markets and other factors are keeping a cap on reinsurance rates in North America and around the world. This soft reinsurance market environment will require traditional reinsurers to find ways to remain competitive. They will need to be able to spot emerging trends and innovate with regard to product design of new and creative coverages. For example, opportunities are emerging for reinsurers to develop new coverages for risks such as cyber liability, business interruption coverage and terrorism lines.

In addition, reinsurers will need to expand into new markets and address any resulting issues that would affect this growth. Besides product design and development, technology and data/analytics will be a major factor that dictates where larger-scale, traditional reinsurers have a competitive advantage over alternative capital markets backed competitors. Thus, capital modeling and enterprise risk management may be an increasing area of actuarial specialty within reinsurers.

Just because a new entrant in the reinsurance market is backed by a nontraditional source, that does not mean that it cannot behave like a traditional reinsurer. Unique strategies may be employed, such as focusing more on insurance and less on reinsurance, outsourcing underwriting, having a product-oriented strategy or relying on size/scale to offer

cheaper coverage. Bart Hedges, Chief Executive Officer for Greenlight Capital Re in the Cayman Islands, recently was quoted in PropertyCasualty360 as saying, “I think what is called alternative capital today could very well be mainstream tomorrow.”

Looking ahead, a recent report by S&P indicates that we should expect to see fewer but larger reinsurers in the future and that these remaining players will leverage capital markets, along with their own capacity, to provide the level of diversification of risk capital that the insurance market requires.

By Barclay Burns, Director

For many professionals in the reinsurance space, alternative capital has been the most exciting “next big thing” in years. but it’s not a new concept. What is new is the growing number of players in the market. The returns are just too lucrative. Have we reached the peak, and will the shoe drop any day now?

There is a long list of people who are counting on the trend not to come to a halt including actuaries, modelers, underwriters, traders, portfolio managers, managing directors and cros, for example. They are employed by insurance companies, reinsurers, intermediaries, modeling firms, investment banks, asset management funds, large institutions, hedge funds and newly created investment management firms specializing in ils capital management.

buyer beware that all good things could come to an end as cat bond yields may continue to drop. The newly created roles over the past few years are likely to stay, though, as the latest “alternative” in reinsurance is quickly becoming mainstream—or, dare i say, traditional.

By KC Cho, Partner

What will this mean for the job market?

800-837-8338 / 312-867-2300 actuaries@dwsimpson.com www.dwsimpson.com

Hot property & casualty jobs!

RETAINED: Specialty Lines Pricing Actuary (Northeast or West, USA): National insurance company seeks an FCAS to serve in a specialty lines pricing role. The position will be responsible for providing rate indications, rate filings and profitability analysis to the product management team. Huge growth potential and company support for Actuaries. (#42779)

RETAINED: Actuarial Leader (Midwest, USA): Regional property and casualty insurance company is looking to hire an FCAS at the executive-level with several years of experience. Position responsibilities will include loss reserving, product pricing and modeling activities. Must have previous actuarial pricing and reserving experience. (#41274)

Consulting Manager (Canada): Top financial firm seeks FCAS or FCIA for exciting lead consulting role. Strong profitability and risk management background required. Strong verbal and analytical skills desired. (#42807)

Actuarial Analyst (Northeast,USA): Commercial lines insurance company in northeast looking to hire Actuarial Analyst. Work will involve commercial lines pricing, catastrophe loss and profitability analysis. You will work closely with senior management. Ideal candidate will have solid SQL and Excel skills and the ability to learn new programming languages. (#43086)

Pricing Manager (Southeast, USA): Auto insurance company seeks Actuary with a solid knowledge of SAS and/or SPSS. Strong predictive modeling and pricing experience desired. Individual must have great analytics and communication skills. Should be progressing toward ACAS/FCAS. (#43005)

AVP, Reserving (Northeast, USA): Leading insurance company seeks a qualified Actuary to serve in a reserving role. Work will focus on reserving for professional lines of business. Experience with professional and casualty lines of business preferred. Ideal candidate will have great communication and statistical modeling skills. (#42512)

Actuary (Midwest, USA): Carrier seeks entrepreneurial spirited Actuary who thrives in flat environment. Will contribute insights and analysis of specialty lines pricing and reserving and lead in predictive modeling efforts. Fantastic opportunity to make your mark in growing company as its stand-alone Actuary. (#43099)

Senior Actuary (West, USA): Market leader in workers’ compensation seeking in-house Actuary to lead predictive analytics group and develop pricing tools/strategy. ACAS or FCAS with relevant experience is desired. (#43038)

Manager, Senior Associate (Southeast, USA): Large insurance firm seeks a Manager and Actuary to work in lending solutions business. This person could come from a life or P&C background but should be an Associate (ACAS or ASA). Supervisory experience strongly preferred as this person will have a small team reporting to him/her. (#43051)

VP & Actuary (Northeast, USA): This position is responsible for managing a staff working on unique P&C risks for personal lines products. This position will focus on pricing strategies for each product line and oversight of rate filings. Prior supervisory experience is required and the successful candidate will be able to communicate with all levels of the organization. (#42478)

Actuarial Associate (Midwest, USA): Small Midwestern insurance company seeks an Actuarial candidate to help build a P&C modeling department and drive direction of the company. Pricing and reserving duties as well. Plenty of autonomy and high visibility in this role. Strong modeling background required. (#42767)

Lead Actuary (Northeast, USA): Global insurer seeks FCAS for this leadership opportunity within the financial lines space. This Actuary should have a broad background that includes work on the product and financial sides, business development, presentation to senior executives, etc. The product focus includes Directors & Officers, Employment Practices Liability Insurance and Errors & Omissions, among others. This is a great opportunity to manage a very large, global portfolio. (#43156)

Actuarial Analyst (West, USA): P&C insurance firm seeks a property & casualty Actuary with at least 1 year of experience, ideally some exposure to personal lines pricing or reserving. Strong communication skills is necessary and exposure to VBA and SQL is preferred. (#43044)

Consultant (Northeast, USA): Our client seeks a Consultant to work within the risk economics group to handle the building and designing of analytics models and other client-facing responsibilities. Financial professional lines, prior consulting experience and ACAS/FCAS are preferred, along with strong statistical skills and a background in predictive modeling. (#42908)

Head of Reserving (Bermuda): Lead Reserving Actuary desired to join global reinsurer in Bermuda. Hands-on experience in various lines of business including property, property catastrophe, risk management, marine and others preferred. ACAS/FCAS required. (#43137)

Senior Analyst (Southeast, USA): Personal lines pricing experience needed to join growing insurance business. Will supervise & train analysts and perform complex pricing projects. Highly visible position and room to grow. Ideally about 5 years of solid experience required. (#42322)

Director, Product Management (Midwest, USA): Subsidiary of large financial corporation seeks Leader capable of managing large complex projects. Several years of product management experience especially in property and casualty desired. (#42942)

Vice President (Midwest, USA): Leading insurance broker seeks ACAS or FCAS candidates with reinsurance broker experience. Work will include reinsurance pricing and portfolio optimization. Superior communication and interpersonal skills desired. (#42869)

800-837-8338 / 312-867-2300 actuaries@dwsimpson.com www.dwsimpson.com

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Mission statement

To be the premier search firm specializing in the placement of Actuaries

and related quantitative professionals throughout the world;

to be recognized for the best service, integrity and forthrightness that the

firm brings to each and every business relationship;

and to be willing at all times to sacrifice short-term gain for the long-term

good of our clients and candidates.

4121 north ravenswood ave, Chicago, IL 60613(800) 837-8338 | www.dwsimpson.com

From the President’s Desk... a year oF MILestonesby: bob morand, president and managing partner

This year, 2014, marks the 25th anniversary of dW simpson doing business in the profession of actuarial and analytics recruitment. it also is the centennial celebration for the casualty actuarial society. and, let’s not forget that the actuarial society of america was founded with 38 actuaries in 1889 and, 60 years later, would become the society of actuaries. That’s 125 years for the soa.

What is the significance of these milestones? it is varied:

1. time passes whether we like it or not.

2. change is inevitable and necessary as time passes.

3. i used to have a lot more hair.

take a minute and reflect on what you were doing 25 years ago, when dave simpson started dW simpson from his one-bedroom apartment in the shadows of Wrigley Field on the north side of chicago. Thanks to dave’s vision and unparalleled work ethic, aided by that of patty jacobsen (who later became patty simpson), dW simpson today is the largest search firm in the actuarial and analytics recruitment space. people know that dW simpson doesn’t like to toot its own horn. but, heck, a bit of a “beep” today is, i believe, warranted.

so, what were you doing 25 years ago? i was an account executive with an ad agency in chicago, working on the miller brewing company account (and, yes, i got to bring home free beer).

What about you? let us know… send an email to bob.morand@dwsimpson.com and tell us what interesting things you were doing 25 years ago. We’ll print a bunch of your responses in the next dW simpson quarterly newsletter. This will be a fun way to reinforce the irrefutable milestone tenets that time passes, change is inevitable and necessary, and that i used to have a lot more hair.

— bob bob morand

patty simpson

dave simpson