The U.S. cyber insurance market dropped from robust, double-digit growth in 2017 to a still-healthy single-digit increase in 2018, Fitch Ratings said.
For 2018, direct written cyber premiums grew 8 percent, down from 37 percent growth the year before. Fitch asserted that the drop does not diminish the cyber insurance market’s potential as a source of growth for U.S. property/casualty insurers.
“We continue to believe that high-profile cyber events, desire for more sophisticated risk management and improved pricing will buoy the segment in the long term,” Gerry Glombicki, director of Insurance at Fitch Ratings, said in prepared remarks.
Fitch noted that reports from insurance brokers and other market experts show gradual increases in take-up rates for cyber coverage and potential for further market expansion. As before, the U.S. remains the largest market globally for cyber coverage. But Europe and other regions are seeing interest in cyber risk management and insurance coverage grow due to regulatory and legal requirements revolving around managing and protecting sensitive data at risk of major fines and penalties.
Fitch noted that high-profile cyber events and previous uncertainty around cyber terms in commercial insurance policies continue to show the need for coverage. Insurers are addressing silent cyber risks by adding affirmative coverage in policies, including sublimits and cyber endorsements, but these efforts vary widely among individual companies.
To date, the cyber market has been immensely profitable, according to Fitch. Statutory industry direct loss ratios for standalone policies remained consistently favorable at 34 percent in 2018 from 35 percent in 2017. Fitch warns that these numbers may not hold in the future, because limited historical claims data present challenges for new underwriters. Insurers choosing to underwrite cyber policies face tremendous uncertainty in measuring the likelihood and ultimate cost of potential cyber events, which can range from attacks to energy infrastructure to ransomware or cloud attacks, Fitch noted.
While cyber insurance in the U.S. remains lucrative, market concentration is still quite concentrated. According to Fitch, the top 10 writers held 71 percent of the total marketshare in 2018, with limited changes in the year-over-year rankings. Chubb Limited continues as market leader for standalone and package cyber premiums combined.
Source: Fitch Ratings