14 November 2017 Insurance

Cyber solutions are evolving

Cyber insurance is evolving quickly, offering opportunities for carriers able to properly price and manage this risk, write James B. Auden, managing director, insurance and Eduardo Recinos, senior director, insurance (LatAm) at Fitch Ratings.

Today the global insurance market for standalone cyber coverage is estimated at $2.5 billion to $3.5 billion. Growth is rapid: the April 2017 Council of Insurance Agents & Brokers’ (CIAB) Cyber Insurance Market Watch Survey reported 32 percent of surveyed companies purchased some form of cyber coverage, up from 24 percent a year earlier. Fitch foresees global standalone cyber premiums increasing to $12 billion to $20 billion within a decade.

Fitch research suggests that a substantial portion of cyber underwriting risk currently lies outside standalone cyber policies. Embedded ‘silent’ cyber exposures in traditional commercial policies are significant and create considerable uncertainty regarding losses generated from a large cyber event. Over time, silent cyber risk will diminish as policyholders and insurers address cyber coverage in policy language. However, in the near term, silent cyber creates a genuine challenge for insurer management and industry observers such as Fitch in fully understanding and measuring cyber exposures.

Better aggregation and modelling tools are necessary to improve insurers’ ability to assess potential losses from larger cyber events. Various experts generated studies estimating potential economic and insured losses from cyber catastrophes, but assessing which events are of most concern, and within the realm of possibility, is difficult.

Cyber insurance is a profitable venture for early market entrants. While the market is poised for considerable premium growth in the next few years, signs of competitive forces eroding profit opportunities may occur in cyber earlier than previous emerging product segments.

Over the near term, Fitch views cyber underwriting as a risk that may exert downward pressure on some non-life insurer ratings if larger loss scenarios emerge.

Ultimately, insurers that lack underwriting expertise, poorly manage cyber risk accumulations, or fail to recognise loss potential from silent cyber exposure within their traditional commercial insurance products are most vulnerable to ratings downgrades.

Don't miss the latest industry news - Sign up to our free email newsletters

More storeis from the FIDES Day Two Newsletter

Reinsurers must step in to close protection gap: Lloyd’s

Guy Carp: where will rates, capacity and T&Cs land?

Blockchain will be a catalyst for innovation

How governments can leverage reinsurers’ expertise on public healthcare schemes

Insurers worry on pricing and excess capacity

Chile more than doubles written premium in 10 years

A period of rapid growth in LatAm

Industry ‘needs to reinvent the wheel’

A different dynamic for renewals

Relationships are key in LatAm

Global players face regional competition in LatAm

Ed: new name; stronger game?

Top three insurtech trends to look out for: Crawford

The impact of Mexico’s recent quakes

Hand in hand with an evolving landscape

Don't miss our insurtech email newsletter - sign up today

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk