In 2024, premium rate change in the US cyber insurance market has fallen to below zero, marking the onset of a soft market. While premium growth stagnated, so did loss ratios, with a 3-point reduction in cyber market loss ratio to 41.6%.
Houston, TX: Annual 2024 US Cyber Market Report by Tokio Marine HCC – Cyber & Professional Lines Group (CPLG), a member of the Tokio Marine HCC group of companies, has found that extortion activity likely reached an all-time high in 2023.
Leak sites, which have become a very strong indicator of activity levels in the market, show a massive uptick in leak site victims, reaching 4,496 in 2023, up from 2,670 the year prior, said the report.
Malicious attackers continue to be the primary cause of data breaches, with only a quarter of these incidents stemming from system failure or human error in 2023 added the report.
“In addition to the increase in extortion activity the time to resolve extortion claims has increased as a result of double-extortion attacks which have become the norm. Litigation in the aftermath of extortion attacks and the prevalence of business income loss have driven cyber loss maturation back to a medium tail timeline, reflecting the extended periods required to fully resolve claims, revealed the report
Jacob Ingerslev, Senior Vice President, Cyber & Tech Underwriting at CPLG, said,“As the U.S. cyber insurance market enters a pivotal phase, it is clear that this is not just a period of stabilization but a moment requiring strategic adaptation and innovation. While hard market growth was fueled by rapid premium increases, the softening market of 2023-2024 signals that pricing alone can no longer drive expansion.”
The future will depend on attracting new policyholders, portfolio diversification and working even more closely with policyholders to address increasingly sophisticated cyber threats. The long-term success of the cyber insurance market hinges on its ability to balance profitability with robust risk management, adapt to regulatory changes, and create a greater cybersecurity investment, said Ingerslev.
The report explores the evolving landscape of the US cyber market, uncovering areas for growth, assessing loss trends, and addressing the attack method deployed by ransomware groups.
The report also outlines the composition of the market, with Tokio Marine US Property & Casualty Group increasing DPW in the US cyber market to $377.9m and retaining 5.2% of the market.
The US cyber insurance market is undergoing a pivotal transformation. Following triple digit growth in the 2020 to 2022 period, the landscape shifted in 2023 and US overall market growth declined to just 1.6%.
Alongside this, there has been a notable rise in cyber extortion activity, and threat actor groups have turned to more aggressive tactics and high value targets.
Adjusting rates and evolving opportunities for policyholder growth
The stagnation in the US market growth observed in 2023 can be attributed to a combination of decreasing premium rates and limited growth in policy count.
Even during the hard market at the start of the decade, premiums drove growth in the overall market. Policy count increases remained very modest, growing by 10% between 2020 and 2023. During the same period, premiums grew by over 142%2,3.
In 2024, premium rate change in the US cyber insurance market has fallen to below zero, marking the onset of a soft market. While premium growth stagnated, so did loss ratios, with a 3-point reduction in cyber market loss ratio to 41.6%.
However, deeper analysis of the National Association of Insurance Commissioners (NAIC) data uncovers some significant discrepancies in loss reporting, casting doubt on the initial outlook. The reported 35.5% “loss ratio” for package policies in 2023 is likely understated and could be over 50% on an ultimate loss basis.