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FOR IMMEDIATE RELEASE
AMSTERDAM - FEBRUARY 07, 2024 07:54 AM (EST)
AM Best believes cyber can be a source of profitable growth and innovation for insurance and reinsurance carriers. But in a new report it warns that a growing cyber book could present a material risk to a (re)insurer’s financial strength if it is not managed appropriately.
The Best’s Market Segment Report, “Cyber: Growth Potential and Pricing Environment Support Appetite Across Some European (Re)insurers” notes cyber is a line with high levels of product risk which requires expertise and knowledge and explains market participants take a different stance on coverage.
Cyber insurance has experienced a hardening rate environment since the rise in loss activity during the pandemic. While rate increases have started to show signs of moderation or even decline more recently, pricing remains attractive.
However, there is a mixed picture in the market in terms of underwriting appetite for cyber. While some carriers remain very cautious about their cyber exposure and show no appetite to expand this part of their portfolio actively—or are even trying to reduce it—others see it as an attractive opportunity.
As a rating agency, AM Best includes a carrier’s assessment of cyber loss potential in its rating considerations—and considers how this cyber loss potential plays a role in the carrier’s capital management and capital allocation decisions.
While the loss potential for cyber catastrophe scenarios currently remains generally below other catastrophe exposures across the industry, AM Best notes an increased awareness around potential cyber losses and a greater integration of this element in carriers’ capital management decisions.
Consequences tied to reinsurance and retro considerations are also assessed as well as a carrier’s ability to put in place sufficient risk transfer tools to protect its balance sheet.
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=340189 .
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.