Insurance companies will significantly increase premiums for cyber coverage during 2021, as high-profile attacks and government action helped boost demand for the products, data collected by industry bodies shows.
Direct-written premiums collected by the largest US insurance carriers rose 92% year-on-year in 2021, according to information compiled by the National Association of Insurance Commissioners, an industry watchdog, and ratings firms.
Analysts say the increase primarily reflects higher rates, rather than insurers expanding the amount they are willing to cover.
“The rate this market is generating is quite astonishing, just in terms of percentages,” said Tim Jawaki, principal research analyst in S&P Global Inc.’s market intelligence business.
The jump in prices helped the US cyber insurance industry bring back its direct loss ratio, or the percentage of its income that it pays claimants, to 65.4% in 2021 from a record 72.5% in 2020. However, this figure is still far away. Direct loss ratio of 2019 up from 47.1%.
Officials say the sometimes rapid rate increase reflects a revaluation of a relatively new market that is maturing quickly, indicating that the insurance industry is coming to grips with pricing cyber risk.
“Cyber risk insurance premiums seem to be in perfect shape after several years of soft market conditions despite an evolution in cyber underwriting,” said Jack Cudale, chief executive officer of Pleasanton, Calif.-based insurer Cowbell Cyber Inc.
Part of the reset includes stringent criteria for those applying for coverage, an approach the White House has lauded as it makes a broader push to strengthen private sector protections. Many carriers now require potential customers to demonstrate that they practice at least basic cyber hygiene, which includes measures such as multifactor authentication.
“Now, if you can’t perform some basic controls, the vast majority of the market is going to say no,” said Adam Lantrip, senior vice president and leader of professional and cyber solutions practice at insurance brokerage CAC Specialty.
Insurance experts say the market turmoil started after Colonial Pipeline Company was hacked in May 2021. The incident underscored the rise of costly ransomware attacks that disrupted businesses and prompted a wave of new cyber regulations from Washington.
In addition to the price jump last year, Mr Lantrip said, many carriers cut their policies. This translated to companies that need more policies — and more paperwork to complete — to maintain the same dollar coverage.
Mr Lantrip’s firm now gives its clients four to six months’ budget to remove all the hassles they need to renew their plans.
“It’s almost getting to the point where deals never end,” Mr Lantrip said.
As the insurance industry has adapted to the risk of criminal hacking groups in recent months, some carriers have even gone so far as to articulate war exclusion for conflicts such as Russia’s invasion of Ukraine. The Lloyd’s Market Association, a trade group, in November proposed new terms to exclude cyber threats from property and casualty policies.
The precise language of such exclusions – and how they are interpreted in court – could prove costly for insurers or companies as more armed conflicts spread into the digital realm.
While the war in Ukraine has involved mostly low-impact cyberattacks by hackers linked to the Kremlin, security experts warn that operations by non-governmental actors on both sides of the conflict could expand the legal gray area covered by it. is not and is not covered by it. Insurance.
“It’s not always clear what war is these days,” said John Bateman, senior fellow in the Technology and International Affairs program at the Carnegie Endowment for International Peace. “There is varying appetite within the insurance community for how much state-sponsored cyber risk they are willing to take.”
This story has been published without modification to the text from a wire agency feed