A number of factors continue to converge in the global cyber insurance space resulting in increased demand, while the average cyber policy limit has roughly doubled in the last six months, according to The Council of Insurance Agents & Brokers (CIAB).
The CIAB’s latest Cyber Insurance Market Watch Survey highlights some slow, but positive trends in the cyber insurance and reinsurance industry, with respondents citing greater limits and increased cyber policy penetration over the last six months, among other positive trends.
The survey, which consists of 16 questions and which targeted brokers of various sizes that focus on a broad range of businesses, reveals that the average cyber policy limit in the last six months was roughly $6 million, compared with approximately $3 million in October, 2016.
According to the CIAB the increase in limits shows how clients are “consistently increasing their limits upon renewal,” which, coupled with first time cyber coverage buyers purchasing greater volumes of coverage, has resulted in the average limit growing by approximately 100% in just six months.
Furthermore, the average largest cyber policy limit placed by survey respondents increased by roughly 66% from $61 million in October 2016, to a reported $101 million. Additionally, the CIAB explains that three respondents noted the development of cyber insurance towers with limits of $600 million, compared with the previous high of $500 million, as of October 2016.
One contributing factor to the increased cyber limits over the last six months concerns greater limits being purchased by both existing and first time buyers of protection, which is supported by the higher levels of market penetration witnessed over the last six months.
32% of survey respondents’ customers purchased cyber cover, in some form, over the last six months, which is growth on the 29% recorded in October 2016, and higher again that the 25% reported in April, 2016.
Ken A. Crerar, President and Chief Executive Officer (CEO) of The CIAB, commented; “As brokers become more experienced with cyber exposures, they are growing their knowledge of this new breed of risk. This is a good sign, as brokers play an increasingly crucial role in both cyber risk mitigation and post-event response.
“The globally-launched WannaCry/WannaCrypt ransomware file encryption exploit is a prime example. Brokers are actively advising clients on the preventative steps to take now to increase the chance of escaping the virus, which has infected hundreds of thousands of systems.”
Respondents revealed that of the clients that purchased cyber protection in the last six months roughly 44% grew their coverage levels, and since the survey started in September 2015 not one respondent has cited a decrease in cyber coverage at renewals, which suggests clients are finding real value in their cyber policies.
According to the CIAB, one of the respondents explained that “most clients that are renewing coverage are actively exploring increased limits, or at least assessing if their current limits are adequate.”
Risk transfer was the number one driver for large companies and SMEs purchasing cyber insurance. Generally, awareness of the potential impact and reach of cyber threats is increasing globally, helped by events like the recent ransomware WannaCry attack.
SMEs, says the CIAB, are becoming increasingly aware of damaging and potentially crippling cyber attacks can be, and take-up amongst this group is growing at the fastest rate.
By its very nature cyber attacks are unpredictable and far-reaching, and with the world continuing its transition to a truly digital one where interconnectivity is increasing all the time, a very large capacity pool will be required to adequately and effectively address the cyber threat.
Fortunately, the CIAB report cites capacity in the space is plentiful, with 81% of respondents witnessing no capacity issue over the last six months. In fact, one respondent described the cyber space as “over prescribed,” said the CIAB.
Other trends highlighted by the survey and accompanying report concerns decreasing premium pricing, with 85% of respondents noting stable or decreased pricing. When compared with the 12% reported six months ago, 31% of the 85% cited a decrease in premium pricing, which, “suggests the market is continuing to soften.”
“Just a year ago, nearly 40 percent of respondents reported an increase in premium pricing, proving that underwriting is tightening and policies are becoming more affordable,” said the CIAB.
Another trend explored by the report is the growth in stand-alone cyber cover as opposed to embedded coverage, which continues to be a trend in 2017. Also, the CIAB explains that most respondents cited no tightening in carrier underwriting during the last six months.