A new study released by Aon, a global professional services firm providing a broad range of risk products, indicates that cyber remained a profitable line of business, as industry loss ratios decreased in 2017 – from 47.6 percent to 32.4 percent, mostly due to a reduction in severity.
The 2017 US Cyber Insurance Profits and Performance report reveals that, in an ‘unprecedented year’ for ransomware attacks, the US cyber insurance market continued to grow, with a total of 170 US insurers reporting writing cyber insurance – compared to 140 in 2016, and 119 in 2015.
Average claim sizes also decreased, from approximately $91,000 in 2016 to $57,000 in 2017, driven by a growth in ransomware claims and a shift from standalone policies to package policies.
Meanwhile, US premiums increased 37 percent to $1.84 billion in the same period, with market participation continuing to grow; the highest growth segment being insurers writing less than $1 million in cyber premiums.
“It is still early days in the development of the cyber insurance product, yet our study reveals that despite several significant and prolific cyber attacks in 2017, industry premium continued to increase and loss ratios continued to decrease,” said Jon Laux, head of Cyber Analytics for Aon’s Reinsurance Solutions business. “This is very encouraging for existing players and those looking to enter this line of business. It shows that insurers have the expertise to offer an appropriate product with first and third party coverages that firms are willing to buy. It also demonstrates that underwriters are structuring and pricing policies in a way that allows them to generate profit. This is a positive outlook which should give cyber insurers the confidence to remain committed to this much-needed line of business.”
Aon’s US Cyber Market Update report reveals that the US cyber market is still relatively concentrated, but that new entrants are beginning to have a dilutive effect; in 2017, the top 10 cyber insurers accounted for 69 percent of direct written premiums – a reduction from 73 percent in 2016. By way of comparison, the top 10 writers of other liability claims made insurance account for 57 percent of premium, and the top 10 in commercial multi-peril account for 44 percent of premium.
The study is based on data from NAIC Statutory filings. As such, it is does not include US business written by non-US insurers and provides an incomplete picture of US insurers that write internationally.
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