Cyber insurance premiums have slowed for the fourth straight year in the US as part of a trend that AM Best attributes to an expanding threat landscape and an increasing awareness of risks.
Direct premiums written in the US cyber insurance market increased by 11% year over year in 2019 to $2.25 billion, but growth rates slowed significantly from 2016-17 when premiums were up by more than 30% annually.
One factor, AM Best says, is protracted litigation, which has demonstrated that cyber attacks can have a longer tail than expected, underscoring the importance of managing 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, AM Best argues that the large-scale global economic and societal disruptions caused by COVID-19 should cause insurers to rethink their stress testing and focus on greater clarity in their contracts.
The rating agency found that standalone cyber policy premiums were up by 14% in 2019, outpacing the 7% growth in packaged cyber policies and highlighting organizations’ escalating concerns about cyber risk.
Additionally, the total number of claims has doubled since 2017 to approximately 18,000 in 2019, which could create a pricing issue if rates cannot keep up with the rising frequency.
Chubb INA Group remained the top cyber insurer in 2019, ahead of XL Reinsurance America Group (AXA XL) and American International Group, with $356.9 million in cyber direct premiums written.
Meanwhile, Hartford Insurance Group again held the most cyber policies in force at year-end, with 543 million.