Global cyber premiums to increase six- to eightfold within ten years: Fitch
The global premiums volume for cyber insurance is set to increase six- to eightfold within a decade, according to a Fitch Ratings report.
The ratings agency expects cyber business to be ratings neutral for most highly rated insurer with sound underwriting, particularly as it represents a relatively modest percentage of individual insurers' overall premium volume and risk exposure.
"Cyber insurance is an emerging business line that presents unique, new risks for insurers," Fitch said in a statement. "Limited historical loss data creates difficulty in pricing coverage. The nature of cyber risk and the wide variety of potential cyber events add to challenges in quantifying risk aggregations and catastrophe loss potential. A lack of standardised policy language and terms can also lead to meaningful differences in individual carriers' product offerings, which is a source of confusion and uncertainty for policyholders."
The global market for stand-alone cyber coverage is estimated to have grown to between $2.5 billion and $3.5 billion annually.
This is largely driven by increasing risk and awareness of cyber-attacks, as well as more active regulation, such as in the US where it is considered a prime factor behind an estimated 90% of global cyber premium originating there. The ratings agency believes the GDRP implementation in May 2018 will also boost the demand for coverage.
Fitch warned that insurer that lack cyber underwriting expertise, poorly manage their risk accumulations or fail to recognise loss potential from "silent" cyber exposure in their traditional commercial insurance products could face pressure on earning, capital or even ratings, if large loss scenarios emerge as the market expands.
Unduly large cyber risk aggregations of specific insurers may not become evident until after a large or catastrophic cyber event, Fitch said.
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