The latest market update from Aon indicates U.S. cyber insurance is growing increasingly sophisticated while the market expands and becomes less concentrated, resulting in continued profitability and shrinking claims.
Following an ‘unprecedented year’ for ransomware attacks a total of 170 U.S. insurers were reportedly writing cyber insurance in 2017, up from 119 in 2015.
The study showed, however, that cyber remained a profitable line of business, as industry loss ratios decreased in 2017 – from 47.6% to 32.4%, mostly due to a reduction in severity.
Jon Laux, Head of Cyber Analytics for Aon’s Reinsurance Solutions business, explained, “It is still early days in the development of the cyber insurance product, yet our study reveals that despite several significant and prolific cyber attacks in 2017, industry premium continued to increase and loss ratios continued to decrease.”
Driven by a growth in ransomware claims and a shift from standalone policies to package policies, average claim sizes also decreased, from approximately $91,000 in 2016 to $57,000 in 2017.
Additionally, U.S. premiums increased 37% to $1.84 billion in the same period, with market participation continuing to grow; the highest growth segment being insurers writing less than $1 million in cyber premiums
The report appears to show a growing capability throughout the industry, leading to increasingly more sophisticated and tailored products with first and third party coverages that firms are willing to buy.
“It also demonstrates that underwriters are structuring and pricing policies in a way that allows them to generate profit. This is a positive outlook which should give cyber insurers the confidence to remain committed to this much-needed line of business,” added Laux.
Despite remaining a relatively concentrated market, new entrants are beginning to have a dilutive effect. In 2017, the top 10 cyber insurers accounted for 69% of direct written premiums – a reduction from 73% in 2016.
Conversely, the top 10 writers of other liability claims made insurance account for 57% of premium, and the top 10 in commercial multi-peril account for 44% of premium.