A new report from the Bermuda Monetary Authority (BMA) shows that commercial insurers in Bermuda increased their cyber premiums almost threefold in 2018, with $1.5 billion of net written premium reported.
This compared with just $557 million in 2017, with premium coming from over 100,000 policies, versus 31,000 in 2017.
The BMA noted that the spike in reported premiums was largely related to the increase in policies written, as well as consolidation of additional subsidiaries writing cyber by Bermuda insurers.
The report also found that 57% of direct premiums (55% in 2017), 71% of reinsurance premiums (84% in 2017), and 71% of package premiums (68% in 2017) were retained by commercial insurers.
Reinsurance premiums contributed the highest premiums both on a net and gross basis in 2018, potentially suggesting increased reinsurer interest in the cyber business.
This was a shift from what the BMA observed in 2017, when most of the business reported was for direct policies on both gross and net basis.
Most of the affirmative cyber policies written by commercial insurers were for worldwide covers, which accounted for 58% (versus 26% in 2017), followed by the US with 25% (56% in 2017), and Canada with 7% (14% in 2017.
Analysts attributed the shift in regional concentration from the US to worldwide to increases in reported business by a handful of insurers, which write a significant number of policies compared to the rest of the market.
Reinsurance policies continue to be the dominant product for worldwide covers both in 2018 and 2017, while direct and package policies dominate the US business.
Cyber claims paid by commercial insurers were approximately $99 million for over 3,800 claims in 2018, compared with $46 million for over 6,600 claims in the previous year.
Direct policies, meanwhile, contributed 89% of the total claims, up from 66% in 2017, whilst reinsurance contributed 7% this year, compared with 29%, and packages 4% for both years.
Cyber claims experienced to date for the cyber line continue to be low, showing loss ratios of just around 26%.
Overall, the BMA recorded an increased number of insurers offering cyber insurance, as well as an increase in the number of organisations utilising Bermuda captive structures to cover some of their cyber risks exposures.
However, the Authority believes that challenges persist for this line of business, particularly in terms of key operational challenges such as pricing, risk aggregation and reserving.
It therefore strongly recommends insurers to take steps to ensure that aggregation risk pertaining to major cyber breaches is appropriately assessed and addressed, and to further utilise reinsurance programs to manage non-affirmative exposures.
Furthermore, insurers should consider how correlation and the potential loss arising from a global cyberattack could impact their own operations, while at the same time being required to pay claims from their insurance business.