Cyber Risk Insurance Market Survey 2011 was posted on our site June 30th, just making deadline – and did that ever surprise me, as the Report has grown from an already lengthy 100 pages to 185 pages. Adding 10 new carriers will do that to you, as will adding a new section on Media Liability coverages.
The increase in the number of new carriers was driven by the land rush of insurers to the new big thing in specialty insurance – privacy coverage (which while not new is getting much more mind share from agents and brokers). Subscribers were asking about carriers that we weren’t covering which, on investigation, had products worthy of inclusion.
Next year we are going to try to whittle the size back down, probably by unwinding some of the Tech E&O coverages that have found their way into the Cyber report (we cover Tech E&O in a separate report each February).
More later (I said on July 7th); later has finally arrived.
Here are some more snips from our Cyber Report:
Annual premium volume information about the U.S. Cyber Risk market is hard to come by, but in reviewing the market, we have concluded that the annual gross written premium is in the $800 million range (up from $600 million in last year’s Report). We suspect that the market will continue to grow, as protection against privacy breaches and the growing importance of post-breach response (also known as remediation) services drives the market.
Privacy coverage is clearly driving the market; Cyber Risk seminars and conferences are packed with prospective customers, carriers, brokers, and attorneys interested in privacy risk, coverage, and services. Interest is translating into purchases, which we (and many others) have been predicting. Management may still be thinking ‘it can’t happen here’ but as more events occur that would be covered, more Cyber Risk insurance is being bought.
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 several 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.
Rates for Cyber Risk insurance, like the traditional commercial insurance lines, are still showing signs of softness. Some of the smaller carriers report plans to reduce rates on the order of 5-10%, while the larger carriers indicate that rates will stay flat or perhaps down a bit (5%). Several reported that they expect their competitors will reduce rates even further, a sure sign of a soft market.
- Note: I am increasingly concerned that the frequency of breaches is higher (perhaps far higher) than anticipated, and that current coverage arrangements may be hard to sustain. Carriers may react to this frequency by increasing retentions, and worse, restricting limits. I don’t think that higher rates will be the answer (though we may see those as well).