AM Best Market Segment Report: U.S. Cyber Insurance Premiums Doubled in Four-Year Span; Overall Market Tops $2 Billion

OLDWICK, N.J.–(BUSINESS WIRE)–Direct premiums written in the U.S. cyber insurance market have
more than doubled over a four-year span, to $2.0 billion in 2018 from
$996 million in 2015, as insurers have increased their writings and
expanded product offerings to meet an ever-growing demand, according to
a new AM Best special report.

In the new Best’s Market Segment Report, “Cyber Insurers Are
Profitable Today, but Wary of Tomorrow’s Risks,” AM Best notes that
growth has slowed from the two prior years, when direct premiums written
grew by more than 30%. Direct premiums written in 2018 grew by 12.6%
compared with the previous year. However, according to the report,
market growth figures likely are understated given that a number of
organizations utilize captive insurers to write cyber coverage.

With awareness and demand for cyber coverage growing, insurers have
removed cyber coverage from traditional insurance coverage by
incorporating cyber exclusions. At the same time, many insurers have
expanded product offerings by adding cyber endorsements to commercial
packaged policies and business owner’s policies, and packaging cyber
coverage with technology errors and omissions policies. This is
pressuring other insurers to follow suit to stay competitive and meet
the demands of policyholders. Stricter regulatory environments, led by
the General Data Protection Regulation in Europe and similar state-based
regulations in the United States, also are driving the market growth.

Highlights from this year’s report include:

  • The total number of claims increased 39% year over year and exceeded
    10 million for the first time in 2018, indicative of the fast-growing
    cyber market. AM Best believes this is evidence of a growing number of
    small and medium-sized enterprises purchasing cyber insurance, as
    smaller companies generally have fewer cyber protections than larger
    companies, making them more susceptible to cyber incidents;
  • Chubb INA Group was the top cyber insurer in 2018, ahead of AXA US
    Group and American International Group, with $325.8 million in cyber
    direct premiums written, the majority of which were for packaged
    policies; and
  • Hartford Insurance Group again held the most cyber policies in force
    at year-end, with more than half a million.

The cyber insurance line’s underwriting performance remains strong;
however, emerging new risks are a constant. Most companies writing cyber
insurance remain prudent about their total exposure, and cyber exposure
relative to policyholder surplus is limited. Although underpricing by
new market entrants is an industry concern, a systemic event remains the
top threat to cyber insurers’ solvency. AM Best still holds that cyber
insurance market presents a significant opportunity for insurers.
Capacity also should continue to grow, given that the line’s
profitability will undoubtedly attract more new market entrants. AM Best
will continue to monitor how insurers are managing their cyber insurance
exposures, and whether they are taking into account sufficiently those
exposures in their enterprise risk management processes. Cyber insurance
growth without corresponding risk controls would be deemed credit
negative.

To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=286713.

AM Best will present a webinar, “State of the Cyber Insurance Market,”
on Thursday, June 20, 2019, at 11 a.m. (EDT). During the event, AM Best
analysts and market experts will explore the market growth, along with
the companies that are most active in the line of coverage, the
development of cyber modeling and how the insurance industry is
positioned to cover those risks. To register for the complementary
webinar, please visit http://www.ambest.com/webinars/cyber19.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

Contacts

Sam Hanig
Senior Industry Analyst,
Criteria,
Research & Analytics

+1 908 439 2200, ext. 5520
samuel.hanig@ambest.com

Fred Eslami
Associate Director
+1 908 439
2200, ext. 5406

fred.eslami@ambest.com

Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644

james.peavy@ambest.com