Global cyber insurance prices jump 32% amid ‘digital pandemic’, warns broker
Ransomware is now the "predominant cyber threat" confronting businesses of all sizes, with the number of attacks increasing 170 percent in 2020, according to a new report by international insurance broker Howden.
Labelled the ‘digital pandemic’, the report suggests that COVID-19 has amplified the risks associated with cyber and revealed pre-existing vulnerabilities to an interdependent and interconnected world that is heavily reliant on digital technologies.
According to the report, these factors have led to what is seen as the largest medium-term rate increase across the entire insurance market as carriers react swiftly to get ahead of spiralling loss costs. Howden’s research finds that global cyber insurance pricing has increased by an average of 32 percent year-on-year in June 2021 on the back of a 50 percent rise since data tracking began. It states that insurers are also demanding more from businesses’ cyber resilience and are only willing to deploy capacity if they are satisfied by the strength of companies’ risk management frameworks.
Meanwhile, the gross written premium (GWP) in the cyber insurance market has more than doubled since 2016, significantly outpacing the broader P&C commercial sector. Howden noted that a similar rate of expansion is predicted for the global cyber market over the next few years (at CAGR of 23 percent), which would see GWP approach $20 billion by 2025.
“Cyber risk has undergone multiple episodes of change and development in its relatively short history, but nothing quite so impactful and fundamental as the events over the last year," said Shay Simkin, global head of cyber at Howden.
"COVID-19, and all of its attendant effects on technology adoption and cyber security, combined with independent or connected changes to the loss environment, has added a big dose of complexity into an already complicated risk landscape.”
Simkin noted that the cyber insurance market is currently driven by a demand and supply imbalance which shows no sign of relenting any time soon. “Claims are up, capacity is down and underwriting profitability is, at best, under pressure," he said.
He added: "The impact on insurance buyers is stark; the importance of being prepared for a cyber attack has never been clearer. With insurers now demanding markedly higher cyber security standards before deploying capacity, businesses need analytical solutions designed specifically for them, combined with focused, expert intermediation to help them secure the coverage that meets their needs.”
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