US cyber premiums grow, while competition surges

The US cyber market has continued to see a marked growth in written premiums year on year, with the market recording a total of $1.84bn in premiums in 2017 according to Aon’s US Cyber Market Update report. According to data from the National Association of Insurance Commissioners (NAIC), the $1.84bn in written premiums recorded for 2017 represented a 37% increase on the previous year, putting this year’s total on par with Aon’s estimates of a total market valuation of $5.6bn by 2020, assuming roughly 30% annual growth. On a worldwide basis, cyber growth is expected to hover around 14% annually according to Aon. But while premiums continue to grow, so do the number of market participants. According to Aon a total of 170 US insurers reported writing cyber insurance in 2017, up from 140 in 2016, further contributing to the increase in demand but decrease in pricing experienced by market participants. According to the Council of Insurance Agents and Brokers, cyber pricing had declined by an average of 0.7% for the last quarter of 2017, despite a rise in demand for the coverage. The number of market participants in 2017 is 30% higher than the number of participants just two years ago, showing how quickly interest in the market has grown. However, not all policies are created equally, with package policies gaining popularity over more comprehensive standalone policies, with lower per-policy prices. Other good news for cyber underwriters came in the form of reduced claims severity, despite the headline-making cyber events that occurred throughout the year including the Equifax breach and the WannaCry ransomware attack. According to Aon claim size across all companies was $56,688 in 2017, down from $90,865 in 2016. The broker said this is partly due to a growth in ransomware attacks directed towards smaller targets including both small businesses and individuals, both of which are the least likely to carry cyber insurance, meaning that attacks may not be on the decline, but rather uninsured individuals are becoming more likely to be targeted. The ease at which low-level ransomware attacks can now be carried out means that there may be an uptick in claims coupled with a decrease in severity. Aon has noted that the data used in its latest report was sourced from the NAIC, and as such does not paint a complete picture of the US cyber market, due to the fact that as a US based organisation, London and Bermuda insurers providing coverage for US risks were not considered. It also does not take into account the entirety of the US cyber market, while information regarding package cyber policies is murky at best, as the term is not defined by the NAIC.

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