US direct cyber market grows 32%
The US cyber market grew significantly in 2017 with direct premiums written by US property/casualty (P&C) insurers (excluding non-US and alien surplus lines insurers) rising nearly 32 percent year over year to $1.8 billion, according to AM Best.
Policies in force jumped 24 percent year on year to 2.6 million in 2017, according to an AM Best special report examining the cyber insurance market. Despite the growth, the cyber insurance take-up rate remains low, particularly among small to medium-sized enterprises, the agency noted.
Average policy limits are rising, with some of the largest companies’ coverage towers above the half-billion dollar mark, AM Best said. On the other hand, the take-up rate for small to medium-sized enterprises (SMEs) remains in the low teens, presenting an area where insurers would like to see growth.
The total number of cyber claims increased to 9,017 in 2017 from 5,955 in 2016, with packaged policies constituting 56.3 percent of the claims and standalone policies making up the remaining 43.7 percent.
In the short term, despite the inherent challenges in managing aggregations and pricing, AM Best believes the cyber insurance market presents a positive opportunity for insurers.
Demand is expected to grow due to the accelerating adoption of technology and the increasing awareness of cyber risks, especially among SMEs. Given the abundant supply of capital and the cautious growth strategies of insurers, the agency expects the overall exposure of the P&C industry to cyber risk to be lower than its exposure to more mature risks. However, this does not preclude the possibility of individual insurers becoming outliers to systemic cyber events due to unexpected loss creep from silent cyber events if these insurers fail to manage cyber risks prudently, AM Best warned. Cyber risk still has many unknowns and will continue to rapidly evolve, it added.
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