Moderating claims frequency drove underwriting performance improvement, with lower ransomware incident costs and a higher proportion of incidents without payment
However, this may be temporary, given the rapid pace of technological and economic change, such that recent relative claims stability may prove short lived
Chicago/New York:
Cyber insurance is the fastest growing market segment in US property and casualty (P/C) insurance, with direct written premiums in up 51% yoy in 2022 to over $7.2 billion.
However, premium rate increases should continue to moderate, as substantial improvement in segment results has led to heightened competition and moderating pricing trends, Fitch Ratings says.
Cyber insurance was approximately 1% of US P/C insurance premiums in 2022.
Fitch expects rates to flatten further, which may lead to a negative shift in pricing trends, similar to current trends in directors and officers liability coverage following a previous sharp rise in rates. The current downward cycle is unlikely to shift, barring a new wave of cyber incidents with higher loss severity or a large cyber catastrophe event.
Standalone coverage is 70% of cyber insurance premiums, due to heightened policyholder demand for protection and insurer efforts to reduce ambiguity in coverage terms or silent cyber risk. Demand for cyber protection as part of risk mitigation has greatly expanded despite sharp increases in the price of coverage.
However, cyber renewal premium rate increases are decelerating, with 4Q22 rate increases of 15%, down considerably from a record 34% increase in 4Q21, according to The Council of Insurance Agents & Brokers’ (CIAB) commercial P/C market survey.
Statutory direct loss plus defense and cost containment (DCC) ratio for standalone cyber insurance declined sharply in 2022 to 43% versus 68% yoy.
Moderating claims frequency drove underwriting performance improvement, with lower ransomware incident costs and a higher proportion of incidents without payment.
However, this may be temporary, given the rapid pace of technological and economic change, such that recent relative claims stability may prove short lived.
Extensive demand for coverage and sharply rising prices have attracted new participants to the cyber market.
Market share is becoming more broadly dispersed due to rapid growth by several carriers. The top 10 U.S. cyber writers held 52% market share at YE 2022.