A.M. Best Special Report: U.S. Cyber Insurance Market Topped $1 Billion in 2016; More Writers Move to Standalone Policies
The Best’s Special Report, “Cyber Line Expected to be One of the Leading P/C Growth Areas,” states that this shift mainly results from many insurance companies realizing that tailored coverage forms addressing cyber liability risks separate from traditional insurance products, such as commercial general liability, business interruption or directors and officers policies, were more efficient and effective. Additionally, due to the general language of packaged polices, insurance companies have faced expensive litigation in cases where such policies did not include exclusory language.
The information discussed in this report is based on the Cybersecurity and Identity Theft Insurance Coverage Supplement, which was initially introduced by the
Overall, cyber insurance for the majority of this universe of companies was profitable, and the direct loss ratio decreased by 9.6% to 46.9% in 2016 from 51.4% in 2015. The decline in direct loss ratio for 2016 is partially attributed to the majority of reported cyber-attacks being related to ransomware heists. In almost all ransomware cases, the losses were well below the deductible and a simple backup recovery resolved and remedied any negative long-term effect of the attacks.
Focusing on the top 20 cyber insurance writers, representing a 87% market share in 2016, standalone cyber policy paid losses relative to direct premiums earned (DPE) increased to 24.3% from 19.5% in 2015. Paid losses relative to DPE for packaged coverages increased to 21.8% in 2016 from 15.7% in 2015. This increase in paid losses for packaged coverages was driven by defense and litigation costs.
The report notes that cyber line of business has been predicted to become one of the leading growth areas within the
That said,
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=263055.
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