Rating agencies are sounding alarms over so-called broker facilities, whereby a global insurance broker bundles into a single risk portfolio a diverse mix of high-dollar corporate exposures like cyber liability, property damage and general corporate liability. A solitary insurance company with specialized market expertise underwrites the multiline portfolio’s terms, conditions and pricing. Other carriers then fill in the remaining risk capacity, absorbing a proportional percentage of the combined portfolio’s exposures.

These follower insurers generally assume the liabilities without reviewing the individual corporate risks in the portfolio, trusting in the lead carrier’s specialized knowledge and underwriting expertise. As a result, their eventual profits or losses directly mirror the performance of that market leader. If the lead carrier misprices a highly volatile line like cyber liability, both the insurer and the carriers following suit absorb the brunt of systemic claims.