Marketplace Realities 2018: Cyber risk

November 6, 2017

    The one thing

    In light of recent ransomware attacks (e.g., WannaCry and Petya/NotPetya), be prepared to question markets on how they quantify business interruption and dependent business interruption loss, as there is a trend toward being more prescriptive with these calculations.
  • Total annual cyber premiums are set to climb through 2018. Industry observers expect premiums to reach $10 billion by 2020.
  • Cyber renewals for both primary and excess cover are averaging single-digit increases. Where organizations have demonstrated increased levels of security and internal policy controls, underwriters have offered premium decreases. Increased competition in the marketplace has also been a factor.
  • Middle market clients (annual revenues below $1 billion) are still seeing a very competitive marketplace with aggressive pricing and broad policy language, as many carriers seek to enter the space.
  • With the E.U. General Data Protection Regulation (GDPR) set to go into effect in May 2018, we expect cyber markets to address coverage for regulatory actions stemming from the new regulation. Furthermore, with increased reliance on Internet of Things (IoT) technology on the part of both consumers and industry, we expect increased gap exposures in technology E&O and cyber coverage on new submissions.
  • More markets are looking to address gaps in property, GL and special crime coverage to include perils arising from cyber exposures, and certain markets are beginning to blend cyber and property coverages. We are also seeing an expansion of cyber coverage in general. Examples include explicit grants of coverage for ransomware and social engineering and expanded cyberterrorism coverage to include nation-state attacks.
  • Carriers continue to focus on better management of limits deployed on programs, with many offering no more than $10 million on a given placement. Some carriers will consider additional limits on a case-by-case basis.
  • Price prediction

    Renewals (non-POS retail; non-large health care)
    -3% to +5%

    First-time buyers
    Competitive market conditions depending on industry and size of company
  • There is at the same time an increase in capacity, with new U.S., London, Bermuda and Asian markets providing limits of up to $600 million in some cases.
  • Accumulation is a growing concern for insurers, particularly from “silent” cyber. Aggregate and excess-of-loss “catastrophe” reinsurance products have been developed to address this concern and rising interest is anticipated, as insurer stakeholders, including regulators, rating agencies and BODs, focus on cyber risk quantification and risk management.
  • Insurers are exploring data analytics partnerships with InsurTech and FinTech in an effort to optimize exposure data gathering, allowing underwriters to assess employee sentiment on how sensitive data is handled. Overall, underwriters want to better understand organizational cyber culture, particularly in cases where organizations are developing holistic approaches to cyber risk across people, capital and technology.
  • Carriers continue to be more accepting of manuscript applications and conference calls in lieu of standard applications. This has led to more competitive quotes due to the increased amount of information provided.