According to rating agency Fitch Ratings, US standalone and packaged cyber statutory direct written premiums increased by 74% in 2021, to nearly $5 billion compared with a 9% growth for the property & casualty (P&C) industry overall.
This major growth was driven by heightened policyholder risk awareness and greater demand for coverage.
According to Fitch analysts, cyber insurance is the fastest growing product segment in the US P&C insurance market.
This is heavily driven by a sharp increase in cyber incidents, such as ransomware, that led to higher claim counts and loss severity over the past two years.
Analysts at Fitch warned that the risk of a systemic cyber incident or several large cyber catastrophes over the near term cannot be discounted, as the frequency and severity of attacks are unlikely to subside, and companies continue to expand their digital footprints.
In addition, cyber supplement data also revealed that annual reported claims filings have doubled for the industry over the last three years.
Analysts also added that standalone cyber coverage – which represents approximately two-thirds of industry premiums, increased by 92% in 2021.
Standalone cyber coverage, direct incurred losses, and defence and cost containment (DCC) expenses expanded by over 300% since 2018.
However, in 2021 earned premium growth exceeded the change in incurred losses, and the standalone cyber loss ratio improved to 65%, a major improvement from the previous year’s 72%.
Analysts added that although this is a positive indication on market performance, direct loss ratios do not provide a full representation of segment underwriting profits as underwriting and adjusting expenses are excluded, as well as effects on premiums and losses from ceded reinsurance.
Along with the strong growth in annual premiums, this loss ratio improvement however, is likely tied to changes in carrier risk selection and tighter policy terms and conditions.
Furthermore, analysts added that The Council of Insurance Agents & Brokers’ Commercial P&C Market Survey indicates that average cyber renewal premium rates increased at an accelerating rate for the past two years, which includes a record 34% increase in 4Q21.
Further commentary on results and company market share is forthcoming in Fitch’s update report on the US Cyber Insurance Market, which will be released in May.