JULY 21, 2020 11:34 AM (EDT)
Best’s Market Segment Report: Profitability Less Certain in U.S. Cyber Insurance Market as New Risks Emerge
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FOR IMMEDIATE RELEASE
OLDWICK - JULY 21, 2020 11:34 AM (EDT)
Direct premiums written in the U.S. cyber insurance market grew by 11% year over year in 2019 to $2.25 billion; however, according to a new AM Best report, the rate of growth slowed from the previous year, marking the fourth-straight year of this trend.
In the new Best’s Market Segment Report, “Cyber Insurance: Profitability Less Certain as New Risks Emerge,” AM Best notes that growth has slowed significantly from 2016-2017 when direct premiums written grew by more than 30% annually, as the cyber threat landscape has expanded and the awareness of the risks have increased. Protracted litigation has demonstrated that cyber attacks can have a longer tail than expected, underscoring the importance of managing so-called silent cyber. Additionally, the frequency and severity of ransomware attacks have escalated, as have data breaches and kidnaps in the health care industry. Given the similarities between a pandemic and a cyber attack, the large-scale global economic and societal disruptions caused by COVID-19 should cause insurers to rethink and enhance their stress testing and focus on greater clarity in their insurance contracts to set transparent expectations for themselves and their clients.
Highlights from this year’s report include:
The report notes that AM Best’s market figures likely are understated given lack of standardization in cyber policies and reporting, as well as a considerable usage of captive and surplus lines insurers to write cyber coverage.
Insurers are making greater efforts to provide clarity and explicitly exclude cyber coverage in non-cyber policies, to diminish or eliminate silent cyber exposures. Clients and businesses are also becoming more sophisticated and want separate cover for cyber, as they do not want other risks (e.g., directors and officers, property) to eat into their aggregate coverage. AM Best believes that comprehensive risk management practices will help prepare for unexpected shocks when they occur.
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=299463 .
AM Best will present a webinar, “State of the Cyber Insurance Market,” on Monday, July 27, 2020, at 11 a.m. (EDT). During the event, AM Best analysts and market experts will explore the state of the cyber insurance market, along with the companies most active in the line of coverage; issues in the wake of the COVID-19 pandemic; and how the insurance industry is positioned to keep abreast of a fast-emerging risk landscape. To register for the complementary webinar, please visit http://www.ambest.com/webinars/cyber20 .
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.