At the time, Gothaer had a reinsurance division (subsequently placed into runoff, with the residual book being acquired by AXA) that was used by various lines of business, including for corporate cover.

There was an increasing need for cyber insurance cover by their larger corporate clients, as well as from small to medium sized entities. Cover was being provided using the general insurance pool, with cyber included within the total limits set.

The risk of using the general pool for cyber lies in the extent and breadth of impact a cyber attack can have. In the case of major successful attack, the limits set for a client’s coverage could be reached without full cover being supplied, leaving clients with massive shortfalls in risk transfer capability through their insurance schemes.

Gothaer tried to provide more extensive cover by trying to develop a separate cyber line of products. They started to learn how to underwrite and understand the actual risk exposure and developed a partnership with Germ I.T. security firm, Secunet as part of the underwriting process through assessing a client’s network and I.T. security and playing a role in loss adjustment in cases of claim by checking appropriate controls had been applied.

The issue remained, however, that to provide the level of cover a larger client may need, Gothaer lacked the ability to understand the losses that could be incurred in order to price and transfer risk to the wider markets.