According to rating agency Fitch Ratings the Cybersecurity and Identity Theft Insurance Coverage Supplement reported that cyber insurance direct written premiums for the property & casualty (P&C) industry grew by 22% in 2020 to over $2.7 billion.
Cyber insurance continues to be viewed as a growth market for P&C insurers, as demand for coverage is unlikely to decline given recent growth in incidents, and premium rate increase momentum is unlikely to subside near term.
Growth in standalone coverage will be fuelled by policyholder and insurer interest in reducing ambiguity in coverage or “silent cyber” risks.
The analysts at Fitch also warned that recent loss experience may lead some underwriters to more cautiously extend coverage and larger loss limits going forward, and utilise tighter policy terms, including coverage sublimits and exclusions.
Cyber remains a fairly modest portion of premium risk for the industry and individual insurers.
However, underwriters face significant uncertainty in 0 measuring risk aggregations and potential losses from severe cyber disaster events.
Cyber risk modelling products remain in early stages of development compared with more established natural catastrophe risk modelling products.
Cyber risk has evolved into a leading exposure and concern for businesses of all sizes. Companies are increasingly aware of the potential for losses from events that include data breaches, data theft, systems outages and failure, and ransomware attacks.
Meeting the challenge of keeping pace with technology and the resourcefulness of hackers more frequently includes utilising the expertise and indemnification capacity of P&C insurers as seen by the growth of the cyber insurance market. However, insurance protection is only part of the solution to cyber risk.
Managing cyber threats rely on an organisations’ ability to assess and quantify cyber risks, as well as implement effective data protection, systems security and other loss prevention measures, and prepare to implement comprehensive remediation measures when an incident occurs.
Effects of more comprehensive regulatory and legal requirements, such as the California Consumer Privacy Act and the New York Department of Financial Services Cybersecurity Regulations, which can trigger significant fines and penalties for failure to manage and protect private and sensitive data, are also spurring interest in cyber risk management and coverage.
James Auden, Fitch Ratings commented: “The cyber market faced a reckoning in 2020 as loss experience deteriorated, particularly from an influx of ransomware incidents.
“While cyber insurance premium rates are rising sharply, concerns remain that underwriters can successfully price this business longer term, given constantly evolving risk exposures and sources of loss.”