RLI: cut costs in the casualty insurance business or expand in cyber insurance (again)?

Research methodology This case was developed from secondary data sources. The secondary sources included the US Securities and Exchange Commission filings (e.g. company annual reports), press releases, industry reports, news reports and company websites. Case overview/synopsis Cyber insurance, which helps policy holders (typically companies) deal with risks related to data breaches and information technology incidents, was a fast-growing and higher-margin line of business in the property and casualty insurance industry in recent years. However, Replacement Lens Investment (RLI), a successful publicly traded insurer in the USA, substantially scaled back its activity in this area at the end of 2021, just as cyber incidents were becoming more frequent and costly. In 2022 and 2023, RLI’s operating profitability in its casualty business segment (which previously included cyber insurance) declined due to competitive market conditions, according to the company. At the time of the case study (in November, 2024) the company’s most recent financial report showed that casualty’s decline in profitability continued, and was near an all-time-low. Chief executive officer Craig W. Kliethermes needed to consider whether cost cutting in casualty, expansion in a higher-margin business (specifically in cyber insurance) or pursuing any other strategy would be a better solution to improve performance. Complexity academic level The case is written for use with late-stage undergraduate students who majored in entrepreneurship. The case would also be appropriate for undergraduate students in insurance/risk management programs.