The cyber insurance line was profitable for 2024, but direct written premiums fell for the second straight year due to declining rates and fewer policies in force
U.S. cyber insurance renewal premium rates have fallen YoY for the last three quarters and are anticipated to remain under pressure in the near term barring a significant event, said Fitch Ratings.
The cyber insurance line was profitable for 2024, but direct written premiums fell for the second straight year due to declining rates and fewer policies in force.
Carriers face ongoing challenges in maintaining underwriting discipline as market competition intensifies. Additionally, they must adapt to an evolving claims environment increasingly influenced by technological changes, including artificial intelligence, rather than regulations or case law.
Fitch expects the cyber insurance market to experience periods of volatility as it evolves in terms of limits, terms and conditions, the regulatory and legal environment, and the cyber threats that could lead to claims.
Corporate executives remain concerned about cyber exposure given the evolving risk landscape, which should increase the demand for cyber coverage.
However, actual uptake rates vary significantly by industry sector and company size.
Generally, larger, more sophisticated companies have some level of cyber insurance protection, but the likelihood of coverage and level of protection declines as revenues decline.
Statutory cyber financial data does not provide a full picture of segment profitability as direct results do not include all underwriting and adjustment expenses.
Effects on premiums and losses from ceded reinsurance also are not considered, and cyber insurance is typically a product for which primary carriers buy considerable reinsurance protection.
While the cyber insurance linked security (ILS) market has grown considerably and is expected to remain a source of growth, it faces considerable modelling challenges before wider adoption from investors. The 144a ILS market is approximately $51 billion, of which cyber insurance represents approximately 2%.
Catastrophe exposure from cyber risks remains a significant source of uncertainty in terms of the nature, likelihood, and cost of the most severe cyber event. Carriers and risk modeling firms expend considerable resources to measure risk aggregations and probable maximum losses from larger cyber events.
However, these tools remain less advanced than natural catastrophe risk models, which have been refined over several decades.
There were revisions to the filing requirements for the statutory supplement for U.S. cyber insurance. Premiums are now divided into three categories: primary, excess, and endorsement, instead of the previous two categories: standalone and package. While the categories have changed, the totals remain comparable.