According to The Council of Insurance Agents & Brokers’ (CIAB) Commercial Property/Casualty Market Index, capacity for cyber insurance may be decreasing while demand is increasing, which could have driven cyber premium price increases of an average 27.5 percent during the first three months of 2022.
Nearly 80 percent of respondents said capacity decreased during Q1, and more than 30 percent said the decrease was “significant.” Meanwhile, 90 percent of survey takers said there was an increase in demand for cyber insurance due to an “increased general awareness of the exposure faced by all individuals and organizations on a global basis without borders or regard for size, score or industry,” CIAB quoted one respondent.
Results from the survey indicated carriers are also requiring more from insureds to obtain cyber coverage. Many insurers require at least multifactor authentication or the potential policyholder is deemed “virtually uninsurable” and a quote is refused, CIAB reported. Agents and brokers also said carriers are requiring stronger passwords, third-party vendor management, an incident response plan, training of employees on phishing, penetration testing, system backups and endpoint detection. Carriers are providing access to tools, assessments, consultations and software to meet the requirements, respondents said.
An increase in frequency and severity of cyber claims remained the primary reason for the quarterly average increase in premiums, which was less than the last quarter of 2021 but still far higher than other lines of commercial property/casualty insurance.
For the 18th consecutive quarter, commercial P/C premiums increased—an average 6.6 percent across all account sizes in Q1 2022. However, consistent with recent trends, premium increases continue to moderate. Most lines showed lower increases than Q4 2021 by at least two percentage points, CIAB said.
CIAB specifically highlighted responses from agents and brokers on commercial property. Respondents said carriers were focusing on property valuations, which helped push premiums up 8.6 percent in Q1. While this continued a downward trend in premium increases for commercial property, carriers appear concerned that current property valuations do not reflect an increase in property values, compounded by the recent upward trend in inflation, which would make repairing or replacing contents of a building more expensive. Respondents said that carriers are asking more questions and reducing coverage and limits in some high-risk locations or classes.