Capacity in the cyber re/insurance space has proven plentiful over the last six months, while the take up rate among clients has been consistently low and pricing has generally remained flat to down, according to the Council of Insurance Agents & Brokers (CIAB).
Results for CIAB’s latest biannual Cyber Insurance Market Watch Survey were largely consistent with responses from the first and second halves of 2017, which saw both policy limits and market penetration levels increase significantly.
Respondents reported that cyber insurance take up rates remained fairly low during H1 at 32%, which was consistent with 31% from May 2017, 32% from October 2017, and 29% from October 2016.
“Although brokers and their clients reported an increase in attention and awareness on cybersecurity and cyber coverage, we still have not seen that translate into an increase in take-up rate,” said Ken A. Crerar, President and Chief Executive Officer (CEO) of The Council.
“Roughly 32 percent of respondents’ clients purchased cyber coverage in the past six months marking no significant change over the past two years.”
In terms of pricing, 58% of CIAB respondents indicated that premiums for cyber coverage had generally remained the same, while 30% said they had seen a decrease in pricing.
CIAB attributed these soft market conditions to the abundance of capacity in the cyber insurance space, which some respondents noted had even increased due to an influx of new insurers.
One respondent from a Northeastern firm said that the market was particularly competitive when it came to pricing, client retention, and coverage terms, while another respondent from a Midwestern firm said that while underwriters were trying to balance pricing discipline and appetite, “with so many insurers, the pressure to win or retain an account was high.”
The average reported policy limit for the last six months was found to be approximately $3.2 million, which represents a decrease of $1.8 million from Autumn 2017, with almost 80% of respondents now recording typical policy limits of less than $5 million.
As with the October 2017 survey, most small and medium sized enterprises (SMEs) were motivated to buy cyber insurance due to contract compliance (28%) and risk transfer (32%), although growing awareness of cyber risk, relatively low prices, and in particular GDPR compliance were also increasingly found to be motivational factors.
CIAB found that one major issue that respondents agreed upon (83%) was a lack of clarity from carriers as to what is covered or excluded in a cyber policy, which was attributed to “a lack of commonality in policy language” and a lack of understanding due to the rapid evolution of risks.
Many respondents (51%) noted that their clients’ purchasing behaviour had been affected by the coverage of recent high-profile cyber events, such as the Equifax breach and the WannaCry and Petya ransomware attacks, suggesting that these events have fuelled demand for cyber insurance.
Additionally, 86% of respondents reported that they had a proactive, strategic approach in place for marketing and educating clients about cyber risks, while 67% said that insurance firms had partnered with external cybersecurity organisations in order to quantify risks and improve their response post-event.