Industry experts at AM Best have affirmed a stable outlook for the cyber insurance market, despite a recent plateau in premium growth. According to a report released on Monday, analysts noted that after a period of robust expansion from 2019 to 2022, the market saw minimal growth in 2023.
Christopher Graham, senior industry analyst at AM Best, attributed the slowdown in premium growth to increased competition and improved cybersecurity practices. He highlighted that rate reductions followed a surge in ransomware attacks in 2020 and 2021, which had previously driven accelerated rate increases.
AM Best’s assessment, based on filings from the National Association of Insurance Commissioners (NAIC), also recognized significant contributions from non-NAIC filers such as captives and Lloyd’s of London. The report underscored surplus lines carriers as pivotal players in the cyber insurance sector, noting their expanding market share and agility in responding to the needs of small- and medium-sized enterprises increasingly reliant on digital platforms.
Fred Eslami, associate director at AM Best, emphasized a positive trajectory for cyber coverage, predicting sustained growth driven by heightened awareness of cyber risks and increasing demand for insurance protection.
The report highlighted the critical role of reinsurance in the cyber insurance market, with over 50% of premiums ceded to reinsurers possessing ample capacity. It also noted evolving underwriting standards, including exclusions for cyber war and silent cyber risks. However, AM Best cautioned that systemic risk remains a concern, with ongoing challenges in adequately testing risk models.
Regarding market leadership, AM Best identified Chubb as the largest writer of cyber insurance, exclusively through packaged products. XL America and Fairfax Financial followed closely, focusing predominantly on standalone coverage. Travelers and Berkshire Hathaway also made notable strides in 2023, with Travelers advancing two places in the rankings and Berkshire Hathaway ascending from 12th to 6th largest insurer by direct premium writings (DPW).
In conclusion, while facing challenges such as evolving underwriting standards and potential reinsurance constraints, the cyber insurance market remains resilient, poised for continued growth fueled by increasing digitalization and cyber risk awareness.
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