Just posted our Cyber Risk and Privacy Insurance Market Survey 2010 at betterley.com. This is our most popular Report (according to readers), which is not surprising, as it covers the line of insurance that is to my mind the biggest New Thing in insurance.
Noting the revised title (Cyber Risk and Privacy Insurance) gives you an indication of how important the term privacy is to the success of this coverage. Extensive publicity about privacy breaches is driving sales, partly due to liability concerns, but also very much because of response costs concerns.
While there are relatively few big $ privacy losses, there are a lot of post-breach response cost losses (not necessarily insured, but that would or could be insured). Is it any wonder that insurance brokers are seeing Cyber Risk insurance as a great opportunity for growth, and that new carriers are rapidly entering the market.
I’m not sure whether there will be sufficient capacity available to cover the larger response claims.
Following are a few snips from the Report summary:
- Many new carriers in the market – we have tried to present a variety of coverages to illustrate what is available in the market. 19 sources of insurance (16 carriers, some with multiple products, and 3 wholesalers – Digital Risk Managers/Lloyds, Euclid/ Hudson, and Safeonline/Lloyds) are included in this survey. These sources represent the core of the Cyber Risk insurance market. Last year’s survey only included 12 sources of product; as the market has greatly expanded, we decided to include more insurers (Allied World/Darwin, Aspen, The Hartford, Navigators, RLI, XL, and Zurich).
- The market is now broadening, as small to mid-sized companies become aware of the possibilities of liability, and especially a breach and resulting response costs, arising out of the possession of private data. Carriers are offering specialized Cyber Risk policies to these potential insureds, as well as enhancements to existing policies, such as Business Owners, Management Liability, and other policies. We don’t cover that product segment in this Report, although we do cover it in our Private Company Management Liability Report (August 2010, being written now), although in less detail.
- U.S. GWP looks to be about $600 million; many carriers are reporting strong growth in premium. Although we must maintain confidentiality about the details, carriers that have been significant players in the Cyber Risk market for at least several years indicate premium growth ranged from flat to over 100%. More than one of these carriers reports growth of over 100%, while at least two others report between 50% and 100%. A few were in the 10-25% range, and the others were under 10%. This is remarkable, considering how difficult it has been for commercial property and casualty insurers to grow their top line revenue in the severe economic downturn.
- One new product (not reviewed, but interesting) is offered by Digital Risk Resources (DRe). It is focused on small to mid-sized businesses and is being provided as a private label product through carriers that have a strong interest in these insureds. We saw this happen with EPLI, as carriers sought to enter the market but did not have (or perhaps chose not to use) the resources necessary to be good at this product.
Privacy coverage and associated remediation services continue to be the big news in Cyber Risk; carriers have rolled out impressive new products, brokers have beefed up their expertise, and insureds are getting proposals.
Proposals are being sought, and policies are being bought. Companies, healthcare systems, not-for-profits, and the public sector are buying coverage, despite a shortage of funds for new insurance policies.
Your thoughts are welcome.