While cyber threats are spurring more financial risk for property/casualty insurers, carriers have managed their exposures as they work to get up to speed with experience and expertise in underwriting and pricing, Fitch Ratings said in its latest market commentary.
“A culmination of high claim activity (or aggregation risk) for property/casualty insurers is a rising risk as insurers increase coverage to protect against cyber threats,” Fitch Ratings said. “However, the potential for any future credit impact to major providers is kept in check by the still relatively small size of the cyber-related insurance market.
Fitch added that it sees insurers as broadening coverage and accepting “larger and potentially more threatening exposures” only as they “continue to improve and refine their understanding of cyber risks.”
Fitch cites statistics from ACE Ltd. to back this up, which found global cyber insurance premiums to have hit between $1.5 billion and $2 billion, reflecting about 8 percent to 9 percent of the market.
With that in mind, Fitch said a big increase in cyber events should not produce insured losses that would reflect “a substantial threat to the capital position of individual insurers or the industry.”
Fitch said that if an “extreme scenario” were to take place today under current conditions, that losses “would be relatively manageable for providers directly covering cyber threats.” Those include ACE, AIG and Lloyds of London, Fitch noted.
Still, Fitch pointed out that there is some uncertainty regarding the costs of cyber breaches that are particularly bad.
“What is less clear,” Fitch said, “is how loss aggregation could play out under a severe cyber attack that leads to insurable events covered by non-cyber-related catastrophe policies, including standard commercial liability, business interruption and professional liability.”
Source: Fitch Ratings