Choosing to write cyber coverage is becoming increasingly costly for property/casualty insurance carriers and rate hikes may not be enough to make up the difference, according to a new Fitch Ratings report.
“Property/Casualty insurers that write cyber coverage face increasing profit pressure, as underwriters reported substantially higher segment claims losses in 2020 than in prior years,” Fitch said. “Significant premium rate increases and tighter coverage terms are anticipated to foster a recovery in underwriting performance over the medium term. ”
Fitch said that claims cost trends won’t change in the near-term, however, due to “a higher propensity of cyber incidents, particularly ransomware attacks.”
Direct written premium for cyber coverage in standalone and package policies grew by 22 percent in 2020 to $2.7 billion, according to data cited by Fitch. Written premiums for standalone cyber coverage grew nearly 30 percent for the year. That jump reflected growing demand for specific cyber protection and insurers interest in reducing ambiguity in coverage relative to cyber risks included in package policies, according to Fitch.
What drives the increasing cyber demand? That would be firms of all size seeking risk management expertise and coverage because of a two-year trend of increasing network intrusions, data theft and ransomware incidents.
Source: Fitch Ratings