Insurers offering cyber coverage have been implementing significant pricing and underwriting actions in 2021 in response to a spike in cyber claims.
It is predicted that immediate improvement is unlikely this year from these actions and reports that insurers are worried about the long-term.
Cyber insurance direct written premiums for the property/liability industry rose sharply last year, reflecting expanding demand for coverage. The insurance industry’s direct loss plus defense & cost containment (DCC) ratio for standalone cyber insurance rose sharply in 2020 to 73% compared with an average of 42% for the previous five years (2015-2019). The average paid loss for a closed standalone cyber claim moved to $358,000 in 2020 from $145,000 in 2019.
The cyber market faced a reckoning in 2020, as loss experience deteriorated, particularly from an influx of ransomware incidents. While cyber premium rates are rising sharply, concerns remain that underwriters can successfully price this business longer term.
According to ratings agency Fitch, cyber insurance is a growing but is a relatively small business line representing less than 1% of industry direct written premiums. Segment market share remains relatively concentrated, with the top five writers holding 50% market share and the top 20 writers maintaining 87% market share in 2020. Losses tied to ransomware attacks have become more prominent in the last two years with a number of incidents already this year. Pricing for cyber coverage has increased at an “accelerating rate” over the last two years.
Blog Submission: Peter Sellwood
PALTD InsureRight – Insurance & Risk Management
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