E&S carriers directed the cyber rally, swept up top margins: AM Best

Excess and surplus lines carriers have swept up on the hard market in cyber, more than doubling their US market share by premium and even more by margin, a report by  AM Best suggests.

“Surplus lines writers grabbed the bulk of the new business and now account for a majority of cyber insurance premium,” authors wrote of the hard market saga from 2020.

When ransomware first alerted markets to widespread rate inadequacy, surplus lines rose quickly to the challenge, increasing direct premium written threefold in 2021 before nearly doubling again in 2022. That brought market share by premium from 25% to 57%, AM Best's dataset shows.

The market revolution also pushed insureds into stand-alone tailored coverage - a segment the E&S writers were well prepared to exploit.

By 2022, 70% of the $7.24 billion cyber market was written in standalone policies, more than the entire market written in 2021 and 85% more than the 2020 market total.

Admitted carriers, more often tying cyber coverage to property policies for smaller insureds, found themselves outside the market's hot spots.

Surplus lines writers are starting to take the larger part of the profits as well. Trends in loss ratios - while coming down mercifully for the market as a whole after the ransomware boom, have favoured E&S carriers with standalone coverage, the very epicentre of E&S carrier growth.

For 2022, surplus lines carriers sported loss ratios a full 12 percentage points below their admitted rivals on standalone covers and were beating admitted carriers on packaged covers as well, AM Best's collected data indicates.

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