U.S. cyber insurance claims and payouts have been increasing since 2018, research from American credit ratings agency Fitch Ratings indicated. As such, cyber insurance has become the fastest growing segment for U.S. property/casualty (P/C) insurers.
Key takeaways from Fitch's research include:
- Cyber insurance claims increased 100 percent annually in each of the past three years -- 2019, 2020 and 2021.
- Claims closed with payment increased 200 percent annually in in each of the past three years -- 2019, 2020 and 2021.
- 8,100 cyber insurance claims were paid in 2021.
Also, the industry statutory direct loss plus defense and cost containment (DCC) ratio for standalone cyber insurance fell from 75 percent in 2020 to 65 percent in 2021 -- but remains above the 42 percent average loss ratio for 2015-2019, Fitch pointed out. This indicates that even though many companies are purchasing cyber insurance, a large portion of cyber risk exposures are not insured.
Along with the number of claims, cyber insurance premiums are increasing, Fitch noted. This may be due in part to ransomware representing a "growing risk" that U.S. organizations.
Cyber insurance direct written premiums rose 74 percent year over year in 2021 to over $4.8 billion, according to statutory financial data from the "Cybersecurity and Identity Theft Insurance Coverage Supplement" from the National Association of Insurance Commissioners (NAIC). Furthermore, NAIC pointed out that premiums for standalone coverage increased 92 percent to over $3.1 billion in 2021.
What Does the Future Hold for Cyber Insurance?
Expect "increased demand, tighter terms, rising premiums and lower coverage limits" for cyber insurance in the years to come, according to governance, risk, and compliance (GRC) advisor ACA Group. Thus, global organizations that lack cyber insurance or want to upgrade their coverage should do so soon.
Meanwhile, venture capital firms and technology entrepreneurs may continue to explore opportunities to fund cyber insurance startups that blend insurance with cybersecurity technologies. In 2021, Resilience and Coalition received funding to expand their cyber insurance and cybersecurity offerings.
New cyber insurance partner programs could become available to MSSPs and MSPs as well. Previously, Cowbell and DataStream in 2021 launched cyber insurance partner programs that allow MSSPs and MSPs to deliver cyber insurance services globally.