Cyber capacity falls as buyer demand for cover rises, finds Amrae

French companies are buying more cyber insurance, but capacity is on the slide and programme structures increasingly complicated at a time when losses are rising and companies need higher limits, an Amrae study finds. The study by France’s risk management association aims to provide more clarity to a market that, according to the organisation, is going through significant levels of volatility at the moment. The Lumière sur la CyberAssurance report, or LUCY, was released this week in Paris and is based on the analysis of the cyber insurance portfolios of eight top insurance brokers operating in France. Amrae estimates that this accounts for about 80%-90% of the cyber insurance market in the country. The goal of the report is to inform moves to reduce uncertainty in the market and help risk managers make the case to boards about the usefulness of cyber risk management and insurance. Amrae has urged other national associations to make similar efforts. The report highlights some concerning trends for French companies. “The most worrying for the structuring of cyber programmes is the reduction of capacities proposed by insurers,” commented Philipp Cotelle, Amrae board member and vice-president of Ferma. The study suggests that large corporations with cyber exposures reaching several hundred million euros cannot obtain coverage that meets their needs. The average limit offered to these firms in 2020 was €38m, and underwriters are also demanding higher deductibles than before. “Fewer and fewer insurers are keen and ready to take the first layers of insurance towers,” said Mr Cotelle. “The reduction in the number of leading insurers is a real issue for the structuring of cyber insurance programmes at large companies.” François Beaume, an Amrae vice-president and vice-president of risk and insurance at Sonepar, stressed that where a couple of years ago leading insurers could fork out €15m-€20m of capacity for the first layer of cyber programmes, now they are limiting their offers to €7.5m-€10m. “Automatically, followers will not offer more than the first layer, and it generates the need to find supplementary actors and multiply the layers to arrange the same capacity that, two years ago, required a couple of carriers,” he said. Even smaller programmes with limits of €8m on average and favoured by mid-sized companies now often require the participation of more than one insurer. The shrinking capacity therefore creates complexities for structuring cyber insurance programmes that make it harder for coverages to spread among smaller companies, with potential consequences for the whole of the business environment. “With more acquisition of cyber insurance by mid-sized companies, they would become more resistant to cyberattacks and the economy would be less vulnerable,” added Mr Cotelle, who is also head of insurance and risk management at Airbus Defence and Space. “The cyber insurance industry would boost mutualisation and the volume of premiums, and stabilise the whole of the cyber market,” he added. As it is, the difficulty of finding adequate cyber coverage is moving buyers towards alternative risk transfer arrangements, including the setting up of captives, to achieve more favourable conditions and higher limits, he said. At the same time as finding capacity issues, the Amrae report reveals a significant increase in the take-up of cyber insurance by French companies. The volume of premiums went up by 84% in 2020, reaching $130m. Out of 287 French companies that have annual turnover of more than €1.5bn, 87% had cyber policies in place last year, up 15% compared to 2019. Among mid-sized companies, or those with revenues between €50m and €1.5bn, 441 had purchased cyber coverages – a 43.6% hike in one year. Among small firms, the ratios are much lower. Amrae found out that only 362 of 140,000 firms with revenues lower than €50m were protected by cyber insurance in 2020. But here too the trend seems to be upwards, with 16.3% growth last year. There has been little change among public services however, as only 75 regional or local French governments purchased cyber coverage in 2020, the same number as the previous year. But higher demand for cyber cover was dwarfed by the near-trebling of losses in the French market identified by Amrae. While losses amounted to €73m in 2019, one year later they reached €217m. The segment’s loss ratio went from 84% to 167% in the same period. One of the reasons for the dramatic spike in loss ratios was some very large claims. Just four losses with values between €10m and €40m accounted for 78% of all cyber losses in 2020. The total number of claims was 221, compared to 107 in 2019, when no claims higher than €10m were reported.

Cyber capacity falls as buyer demand for cover rises, finds Amrae

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