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February 16, 2024
Those were among the key takeaways from an exclusive interview with The Insurer TV on the sidelines of NetDiligence’s Cyber Risk Summit in Miami Beach this week, where Hannes spoke to the media for the first time since the MGA’s January launch.
The Insurer broke the news of the venture’s launch in January, which includes former CoverHound CEO and CyberPolicy founder Keith Moore as CEO, and former Liberty and Coterie executive Ray Lynch as president and COO.
“There was an opportunity in the market that I had seen from portfolio management in cyber at several different carriers, in my past experience, and there was a lot of opportunity for not only innovation, but also economic efficiency in those processes,” Hannes said.
“We’re looking to combine not only the lessons learned in historical portfolio management, but also utilising tools that have come online in the last 12 months into our value proposition,” Hannes explained.
The industry veteran has also worked at major underwriters that include Beazley, Hiscox, Axis, The Hartford and Chubb.
Bob Kimmel-led K2 Insurance Services – launched in 2011 – has built out a diversified platform targeting niche segments and has grown to having around $1.6bn in premium under management.
Delivering value to K2’s existing customer base
Asked what a cyber offering could look like within the K2 platform that would be different from what could be achieved within the confines of a typical balance sheet carrier, Hannes said the answer is “really simple”.
The new cyber MGA is looking to deliver value to K2’s existing customer base, and “meet them at the point of purchase and improve the customer experience”, Hannes said. She noted that the MGA is launching with deep distribution relationships along with underwriting management expertise – elements that other cyber MGA launches “have yet to enjoy”.
“[It’s] not just about claims, [it’s] not just about underwriting or risk engineering – but how do you thoughtfully bring those components together to favourably influence a P&L and ultimately serve your customers [and] meet them at the point of where they're at, but also in a digestible manner?” Hannes added.
K2 has excelled by taking a specialist approach, and Hannes also discussed how K2 Cyber will fit the platform’s overall approach to tackling niche segments.
“The vision that Bob Kimmel had when he started the company was spot on in terms of understanding the niches and the behavioural buying powers to grow a business – and cyber is no different,” she said.
“[K2 Cyber] is taking that model of the first wave of MGAs… and bringing the power of the K2 model into cyber where we can attack niche markets that are either underserved or not served at all in terms of that continual customer behavioural analysis, and what not only gets buyers but keeps buyers, and makes them better risks,” Hannes added.
Strong interest from around the industry
Hannes was coy about the MGA’s ultimate ambitions and what its product may ultimately look like, but said that the business has had no shortage of interest from potential trading partners about contributing to the new venture.
“The interest in K2 Cyber has quite literally been overwhelming in the best possible sense from either reinsurers or carrier partners looking to get involved. And frankly, they're coming to us with problems to solve as much as we're articulating the issues that we've all seen in our historical experience, and [are] just very ripe for a solution on that next generation of cyber insurance,” she said.
The ambition of K2 Cyber, Hannes said, is to “bring that cyber lens into the fold of the massive distribution network” that K2 has, while “taking the lessons learned of that historical distribution network that I've not only grown up in, but obviously intricately know, from the last particularly seven, eight years as a portfolio manager”.
“The fundamentals still apply”
Hannes also discussed the launch in the context of current market conditions, which have stablised in the past year after soaring rate increases and restrictions in appetites, which have led to an influx of capacity in the market.
“The fundamentals still apply,” Hannes explained.
“And so when you've got a blank slate, like K2 Cyber has, you can take those fundamentals of portfolio management of technical pricing sufficiency, of economically advantageous underwriting, and bring that into an offering for our carrier partners,” she said.
“What it has to do with the market is that obviously, we went through a lot of change, and [we had] years of account 2019, 2020 and 2021, where we learned what technical pricing, [rate] sufficiency really means, and we as an industry now have the data to back it up,” Hannes added.
Other cyber MGAs have not benefited from having the “historical infrastructure” of a mature underwriting business – like “sound portfolio management” where data-driven insights are used “at the point of underwriting”, she added.
Hannes declined to elaborate on hiring plans for the new business and whether it plans to take a “low-touch” approach, but did lay out a vision of the firm’s approach.
“As a portfolio manager and a product head, I deeply understand what drives the underwriters in their day-to-day operations and you need to align that drive and intrinsic thirst for knowledge into their day-to-day job of not necessarily individual account underwriting but also directly contributing to portfolio management,” Hannes commented.
