According to a new report by rating agency AM Best, the ransomware attack on US energy firm Colonial Pipeline has impacted the cyber insurance segment, with premiums for standalone cyber policies growing beyond 28% in 2020.
The report highlighted that the higher rate of growth for standalone policies gives an indication that organisations are having escalating concerns about cyber risk and their strategic choice to purchase policies solely for cyber risk protection.
Packaged policies are preferred by small and medium-sized enterprises which lack the staffing or sophistication to analyse cyber risk on a stand-alone basis and prefer to bundle cyber policies with their other liability policies.
AM Best believes that the growth in premiums has been overshadowed by an even greater increase in claims. From 2017 to 2020, annual premium grew at an average of 19%, but claims have grown 38%, reflecting a steady increase in the sophistication of criminals ability to penetrate and disable networks.
The Colonial Pipeline attack has been a wake-up call for insurers as incurred loss ratios are also rising and many insurers are now realising the significant risks inherent in the line.
Sridhar Manyem, director of industry research and analytics commented: “As the Colonial Pipeline attack has shown, cyber is a very complex risk, with far-reaching impacts to clients and insurers alike.
“The classifications of these events as terrorism, criminal activity or acts of war have different implications for insurance, and will require guidance from government entities as clients and insurers navigate these cases.”