Cyber mutual MIRIS gains insurance licence

A first-of-its-kind cyber mutual insurer has been approved by the Belgian regulators: Mutual Insurance and Reinsurance for Information Systems (MIRIS).

MIRIS will underwrite direct cyber insurance on behalf of its owner-members.

Licensed to begin operating from the beginning of January, the cyber mutual can only accept members from the European Union and European Economic Area.

German chemical group BASF and its Belgian peer Solvay are among the 12 founding member companies of MIRIS, according to Reuters, with another 40 companies interested in joining.

“Innovation of this level of importance in the insurance industry is unusual,” said Danny Van Welkenhuyzen, MIRIS’s CEO.

“The National Bank of Belgium, as regulator, needs to verify all aspects rigorously – the suitability of the members and of the governance structure, and the feasibility and solvency margins of the business plan.

“We have worked closely with them for many months to satisfy the stringent requirements appropriate to the project. They have been a fantastic partner and we are delighted to have obtained the licence,” Van Welkenhuyzen added.

Members’ chief information security officers (CISOs) and insurance managers will contribute to a risk control function that screens new members and shares risk management best practices.

“Cyber risk is probably the fastest-evolving risk the insurance market has ever needed to consider. MIRIS will have a role in promoting and validating excellence in cyber risk protection, as well as providing risk transfer capacity,” said Mark Pollard, MIRIS’s chief operating officer.

“In an industry where data and past experience shape the market response, this rapid evolution creates uncertainty, and consequently market volatility, which challenges the risk transfer objectives of the policyholders,” said Pollard.

Some €25m of capacity will be allocated to each member for its first two years of operation. This is expected to rise to €30m in its third year, according to insurance industry credit ratings agency AM Best.

“MIRIS aims to provide additional capacity and, in the longer term, to help to stabilise the market for its members. That depends on the members being exceptionally well protected against the risks,” Pollard said.

Seeking alternatives

Hard market insurance pricing, combined with a lack of available capacity to cover cyber risks in particular, have driven buyer demand for alternatives to traditional insurance products.

This drive to find alternative solutions encompasses captive insurance structures, as well as the use of mutual entities, such as MIRIS.

This was emphasised in a recent article from AXA XL penned jointly by Marine Charbonnier, the specialty insurer’s global programmes and captives regional director for Europe, and Carlos Rodriguez Sanz, its cyber product manager for Asia Pacific and Europe.

“Captives can help alleviate the symptoms of a hard cyber insurance market. In particular, captives can provide capacity where market appetite is currently insufficient. In response to a rise in the frequency and severity of cyber claims, a number of insurers scaled back their participation in the market or moved to higher layers,” said the AXA XL article.

The insurer’s analysis noted that traditional insurance, when combined on a panel with alternatives such as captives, can provide an overall solution to meet sizeable cyber exposures, given industry willingness to be flexible to meet gaps where they exist.

“Involving a captive in a cyber insurance programme should give insurers in the programme additional confidence and help secure their support. Captive participation can also help manage the overall cost of cyber insurance, especially where they participate in primary and low-level excess layers, where capacity is more limited and where pricing is highest,” the insurer’s analysis said.

“Reflecting current capacity constraints in the cyber market…Belgium based MIRIS Insurance will provide supplemental cyber capacity to European companies on a co-insurance basis from January 2023, following pricing and wording set by the primary insurer. AXA XL is currently working with a number of clients looking to incorporate MIRIS capacity into their programmes,” AXA XL’s article added.