The number of U.S. insurers providing cyber insurance keeps growing rapidly along with the ever-increasing amount of cyber attacks.
As of 2017, 170 U.S. insurers reported writing cyber insurance, up from 140 in 2016 and 119 in 2015, according to Aon’s latest U.S. Cyber Market Update report. (The numbers do not include MGAs.)
Despite the rapid growth of new market entrants, cyber is still profitable. According to the report, industry loss ratios dipped from 47.6 to 32.4 in 2017, primarily because of a reduction in severity. As well, U.S. cyber premiums hit $1.84 billion in 2017, a whopping 37 percent increase compared to the previous year. Aon attributes the jump to growth in the package business, which experienced a 98 percent increase in year-over-year premiums. (Standalone cyber premiums grew 8 percent).
Jon Laux, head of Cyber Analytics for Aon’s Reinsurance Solutions business, argued that the trend was significant, even though cyber insurance is still a relatively new product on the marketplace.
“Our study reveals that despite several significant and prolific cyber attacks in 2017, industry premium continued to increase and loss ratios continued to decrease,” Laux said in prepared remarks.
Laux said the trend shows “insurers have the expertise to offer an appropriate product with first- and third-party coverages that firms are willing to buy.” He added that underwriters in the cyber space are “structuring and pricing policies in a way that allows them to generate profit.”
With those elements in mind, Laux said that cyber insurers should remain committed to the surging business, a coverage he called “much-needed.”
Here are other findings from the Aon report:
- New cyber market participants averaged $140,000 in premium each.
- Small commercial insureds are a growing portion of the overall cyber markets.
- Cyber criminals tend to favor ransomware these days.
- Individual insurers in the space saw loss ratio results both significantly higher and lower than the 32.4 average.
- Underwriters with at least $5 million in direct written premiums saw loss ratios from zero to 223.7.
- The top five cyber insurers wrote 51 percent of direct written premiums in 2017, down from 52 percent the previous year. For the same period, the top 10 insurers accounted for 69 percent of the direct written premiums compared to 73 percent in 2016.
- For 2017 cyber coverage, claims against first-party coverage accounted for two-thirds of all claims, vastly outnumbering third-party claims. For standalone policies, first-party claims made up 59 percent of the total, and they were 72 percent of the total for package policy claims.
Aon’s full report is called “2017 U.S. Cyber Insurance Profits and Performance.”