Cyber insurance represents significant growth opportunity for US insurers, says Fitch
Cyber insurance coverage continues to be one of the fastest-growing segments in the US, according to Fitch Ratings, fuelled by increasing cyberattacks and regulatory requirements. The ratings agency said cyber insurance represents a significant growth opportunity for US property/casualty insurers.
Standalone cyber direct written premiums grew by 7% in 2017 to $986m, according to aggregate statutory data for the US property/casualty industry. Standalone and package cyber premiums combined grew 54% to $2.0bn for the year, said Fitch, adding that Allianz projects that the cyber insurance market could reach $20bn by 2025.
Fitch said the industry statutory direct loss ratio for standalone cyber insurance fell to 35% in 2017 from 43% in the prior year. While direct results do not incorporate all claims and underwriting expenses, or the effects of reinsurance, this result is indicative of strong underlying profitability thus far in the cyber market, it said.
“Profitable results in a new market are attracting competition to the cyber space,” said James Auden, managing director, Fitch Ratings. “Roughly 75 distinct insurers wrote over $1m each of annual cyber premiums last year alone.”
Growth in package-related cyber premiums reflects growing efforts by insurers to specifically include cyber coverage and endorsements in policies that may hold cyber exposure but which lack explicit policy terms or premiums related to cyber risk, Fitch explained. However, it added that some of the growth in 2017 package cyber premiums also reflects variability and changes over time in how companies report cyber premiums in the statutory supplement.
“As cyber underwriting exposure grows, more cyber incidents will be covered, generating claims that lead to weaker underwriting results,” said Gerry Glombicki, director, Fitch Ratings. “From an individual underwriter perspective, the risk of naive capacity entering the market, growing rapidly without sufficient expertise and ultimately suffering outsized losses in cyber is an expanding possibility.”
In terms of the 2017 US market share of standalone and package cyber coverage combined, Axis Capital Holdings holds the largest share (16% direct market share), followed by Chubb (15% direct market share) and AIG (11% direct market share), while AIG remains the largest standalone cyber writer.