Marsh expects ‘some flattening’ in UK cyber market this quarter but limited capacity

Some flattening of pricing in the UK cyber insurance market is expected in the third quarter but underwriters are expected to continue operating with limited capacity through 2022, according to Marsh. It added that insureds are being asked to provide more technical details on cyber controls during their submissions In its UK Cyber Insurance Trends Report for 2021, Marsh notes that rate increases for cyber polices have continued during the last 12 months, intensifying in Q3 and Q4 of 2021. “Given that buyers have seen significant pricing increases for the 12-month cycle up to the second quarter of 2022, some flattening of pricing is expected in the third quarter of 2022. We expect to see underwriters continue to use data and target industries that align to their appetites. This will likely lead to greater diversification of pricing by industry vertical and between insurers,” the report says. It reveals that in the first quarter of 2021, more than 90% of organisations that buy insurance through the London market experienced an increase in cyber insurance pricing. By the fourth quarter, this rose to 98%. According to Marsh, the UK cyber insurance market is now focusing on addressing systemic risks within the cyber portfolio, with exclusionary language appearing. The ongoing Russia-Ukraine conflict is also creating significant concern that cyberattacks may intensify as the crisis deepens. “War exclusions in cyber policies were already heavily debated, with the London Market Association publishing its model exclusions in December 2021. The Russia-Ukraine conflict has brought the topic into an even sharper focus for all parties, and the complexity of the issue means this will likely remain contentious throughout 2022,” the report states. Marsh says underwriters will likely continue to deploy capacity in the $2.5m to $10m bands. It notes that there are several new entrants in the cyber market, increasing capacity by about $20m. The broker expects limits to remain at a maximum of roughly $400m, although additional domestic insurers should lead to US-domiciled companies seeing close to $600m in limits. Looking at particular sectors, the report explains that the UK aviation sector has experienced the most significant limit reductions, down 19% from a £120m average in 2020 to £97m last year. Limits in communications, media, and technology were down 15%, from a £97m average in 2020 to an £82m average in 2021. Data breach and ransomware incidents continued to be the most common type of cyberattacks in the UK last year. The report notes that data breach attacks have witnessed a slight decline but ransomware events increased again in 2021. Marsh states that cyber risk continues to occupy an increasingly elevated position on risk management agendas. The broker says multiple factors are driving clients to seek cyber insurance, not least the Covid-19 pandemic and the rapid adoption of remote-working technologies. Marsh says underwriting continues to be stringent, with more insurers hiring technical cybersecurity specialists and engaging in outside-in scanning. It adds that the placement or renewal process may require increased involvement from an insured’s chief information security officer. “Cybersecurity controls are key. Insurers are focusing on the controls that organisations have in place to improve their cyber resilience such as multifactor authentication, cyber incident response planning and digital supply chain risk management… Having the right controls in place can help you improve your level of insurability,” states the report.

Marsh expects ‘some flattening’ in UK cyber market this quarter but limited capacity

Stringent underwriting continues, with more details on controls required by underwriters

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