Although the cyber insurance and reinsurance market has seen steady growth over the last year, there remain significant untapped opportunities, particularly in regard to cover for SMEs, according to rating agency A.M. Best.
The agency’s Market Segment Report observed that cyber risk awareness benefitted from a number of high-profile cyber events in 2017, with ransomware attacks like WannaCry and NotPetya receiving significant media attention and highlighting the growing risks of business interruption exposure.
These events have driven an increase in demand from national accounts and Fortune 500 companies, but A.M. Best found that untapped opportunities remain in the small to medium-sized enterprises (SMEs) market, where the take-up rate remains in the low teens.
SMEs currently remain complacent due to the unfounded assumptions that hackers will only target larger businesses, and that existing insurance policies will cover cyber risks, although this attitude is beginning to change.
Many SMEs may also be underestimating business interruption risks, which can more severely impact smaller businesses that lack the resilience and diversity of national account clients.
A.M. Best observed that cybersecurity insurance grew considerably over 2017, with total cyber direct premiums written (DPW) increasing by 32%, and policies in force increasing by 24%.
2017 also saw a large uptick in packaged policies, while the total number of cyber claims increased to 9,017, up from 5,955 in 2016.
Demand is also expected to grow further as the adoption of technology accelerates and businesses become increasingly aware of cyber risks, while abundant capital supplies and cautious growth strategies have ensured that the overall exposure of the property and casualty (P&C) industry to cyber risk remains relatively low.
However, A.M. Best noted that managing aggregations and pricing remains an inherent challenge for re/insurers, while silent cyber risks and other unknown threats may leave some companies exposed to systemic cyber events.
