Operator: Thank you. And the next question comes from Josh Shanker with Bank of America.
Josh Shanker: Yes. I’m going to add of course the reparatory of people with congratulations to Albert and Pete. Albert, thanks for all you’ve done and best of luck.
Albert Benchimol: So, two things — just two things I want to add Pete’s name, so don’t worry Pete, I’m still around until May.
Josh Shanker: That’s true. That’s true. And of course I mean Vince not Pete of course I know Pete. And so my question involves the new disclosure. I’m really happy. I love the new disclosure. And I’m looking at the cyber growth. And you grew fairly strongly in cyber in the first three quarters of the year and the growth slowed in fourth. I’m wondering if there’s anything we can read into pricing of cyber as the year ended. I got 31% gross premium growth in the first nine months of the year and just three in the fourth quarter. Is there anything we can learn about the markets there?
Albert Benchimol: No. Maybe I think what I can do is just give you a context, right? So, we’ve been for close to two years now rightsizing our exposures and we were very happy taking absolute exposures down, while we were benefiting from pricing increases. And as Vince mentioned earlier, we had 20% rate increase in the quarter we had 50% average rate increase in the year. So you actually have the same rate of reduction in exposures, but you’re getting a lower amount of rate increase. And so hopefully you understand what I’m trying to get to on the math. But, I guess, if I could just take a bigger picture on cyber. I continue to believe that cyber is going to become one of the most important lines of business for insurance. And whoever you talk to in terms of observers talk about the strong growth that’s expected over time.
But I think we also recognize that it’s an important product, but it’s a young product. It’s emerging. I think that there are — the understanding of the risk and the tail is growing a lot. I think the industry is doing a very good job of trying to manage around the tail exposure. And as we’ve told you we’re big fans of the line. We’re very good at it. But we want to manage our tail exposure where it is until we get even more comfort around the tail exposures, around reinsurance capacity, around wordings and so on. So we feel very good about the fact that we are sustaining leadership positions on the cyber side which I think is a great investment in the future. But on the other hand, we’re not going to do it by taking excessive risk in the near-term.
And so we’ve got great incoming business. We’ve got a very strong reinsurance program. And we think that right now that’s the smartest way to approach cyber as we add more comfort around the tail risk.
Josh Shanker: Okay. And then second on similar vein the new gross premium disclosure. You guys already know what our 1/1 renewals look like. I’m wondering if there’s any help you can give us on thinking about the new terrorism/property disclosure versus property only. How much premium decline should we think about in the sum of the former two versus the current given what you know about your 1/1 renewals?
Albert Benchimol: So I apologize. I don’t follow the question. Are you asking about anticipated terrorism and property premiums on the insurance or reinsurance?
Josh Shanker: Yes. I mean in my mind that you’re not doing property reinsurance anymore, but the new disclosure calling terrorism and property I think I might be mishandling a 1/1 — a first quarter reinsurance volumes because I’m making a mistake about things that are terrorism and things that are property. Maybe you can sort of clarify a little bit about what we should expect the new properties premium. Yes.
Albert Benchimol: Appreciate that. So number one, I think, property premium there’s a couple of left — on the reinsurance side there’s a couple of left over premiums, but we’re talking like single-digit millions. We wouldn’t worry about that. I think that the combination of property and terrorism is on the insurance side not on the reinsurance side. And I would tell you that our position right now is that we expect to grow property and terrorism going into 2023. We’re seeing very strong market conditions in both. And our posture on it right now is that we would expect to see growth in property and terrorism. Vince, anything to add?
Vince Tizzio: No I think that’s right.
Albert Benchimol: Yes. Yes. Okay.
Josh Shanker: Okay. And again in the useless advice category that Meyer just started is a great opportunity given the new segmentation to give those triangles a look in the K and I fully support that.
Pete Vogt: Yes. Thank you for the note Josh. We will be separating cyber out because it will be in the K now. So when we do the GLTs you will be able to see cyber separately. So I’m assuming that will be a nice big improvement for you.
Josh Shanker: Fantastic. I do appreciate it. And Vince, welcome to the call.
Vince Tizzio: Thank you.
Operator: Thank you. And the next question comes from Matt Carletti with JMP.
Matt Carletti: Yes. Thanks. Good morning. I just want to follow up on Josh’s cyber question. I was — hopefully you could just peel back the onion a little further. Can you talk a bit about kind of modeling tools how you view P&Ls, kind of, some — Albert some of those things you talked about in terms of management of the risk, but just RDSs maybe how much aggregate rate online has moved. You mentioned kind of pricing over the year, but as kind of you view rate online a few years ago versus now what are we looking at? And then lastly, any view on rating agency potential actions or views of the line in terms of how they think about risk aggregation and some requirements it might put in place?
Albert Benchimol: Right. Thank you for that. So again just kind of unstructured answer on cyber. We try to manage our exposure on the front end and on the back end. On the front end as you know we’ve significantly increased our underwriting standards and guidelines in terms of making sure that we don’t ensure any more, anybody who doesn’t have good cyber hygiene in place. We’ve got our own wordings making sure that we exclude law and infrastructure in our coverages. And then, we analyze those, we use — I got to say at least half a dozen different models including our own. So I think that we try to make sure that we capture everybody’s perspective on that. And so you can imagine obviously, we’re at Lloyd’s, we use the Lloyd’s RDS scenarios, we use our own scenarios and they go through it all.
And at the end of the day, as you know, we buy a 60% quota share we buy an ag stop loss, because we feel that right now additional security is a good thing. So we’re certainly not stretching any more than we need to on that one. We let our people go crazy on threats and PML scenarios and just make sure that our wordings cover through it. Look, my hope is that in this year, the industry will continue to make progress on wordings. We’re starting to see some pickup in potential CAD bonds and capital markets participation. So I actually think that this is a line of business that’s going to evolve, favorably for the insurance industry. But as you’ve heard me say to Josh earlier, we are continuing to reduce our exposure counts while we’re managing the tail.
And I think right now, we still have some opportunities for growth in dollars and we’ll do it cautiously.
