In today’s dynamic cyber market, the insurance industry is constantly navigating challenges from capacity fluctuations, policy wording debates, and a roller coaster of cyber threat shifts. To better understand the forces driving today’s cyber insurance market, Everest Reinsurance and Zywave recently collaborated on a survey of cyber insurance participants including brokers, underwriters, and incident response professionals, and found that while the cyber market is still experiencing growing pains, it is well on its way to maturity.
Overall, the survey uncovered that rate adequacy is a top concern for underwriters. This comes as no surprise as 50% of the underwriters surveyed have seen, on average, flat to negative rate on primary business, and 66% of underwriters writing excess business have seen the same rate trend. In fact, 7% of respondents noted average rate decreases of over 30% on excess – a far cry from the significant increases seen just a year or two ago. A majority of underwriters polled (nearly 80%) said that competition from new and existing players has ramped up significantly and they have far less leeway on coverage or price. Most respondents (approximately 70%) agree that “it's a brokers’ market right now.” And from the brokers perspective, the good news is that most felt that underwriters are maintaining underwriting discipline.
Another hot topic in the market is coverage, more specifically the war exclusion clause. The survey found most carriers are working on modernized war exclusions and support them as a long-term strategy, even while brokers are less supportive. Looking ahead, underwriters increasingly believe that a future standard cyber insurance policy will contain several exclusions aimed at managing aggregation risk, while brokers are less supportive of this direction.
Effectively Managing Cyber Threats Starts With Knowing the Trends
If not managed skillfully, the cyber market’s strengths can also be weaknesses. When it comes to managing cyber portfolios, it pays to recognize the trends. The following takeaways from the survey can help insurers effectively manage cyber threats:
1. Learn from past events to combat pixel tracking claims: As pixel claims continue to be a concern, underwriters should apply lessons learned and take actions such as adding supplemental questions on applications or implementing specific exclusions to limit exposures.
2. Keep a close eye on rising third-party claims: With an uptick in both data breach and non-data breach related third-party claims, underwriters should closely monitor and leverage appropriate underwriting evaluation tools.
3. Thoroughly monitor portfolios: To effectively defend portfolios from losses, underwriters should regularly monitor their portfolios, as well as utilize all available resources including in-house, third party and additional vendors in order to maintain a clean book. Long-term success and cyber market maturity will hinge upon the industry’s ability to adequately manage pricing, underwriting, and portfolios. Those who stay the course, continually invest in improving and strengthening their portfolios, and respond quickly to trends will position themselves – and their portfolios - for success.
To learn more about the current cyber market trends, download the whitepaper here.
The views and opinions expressed in this article are solely those of the individual author and do not reflect the views of Everest Group, Ltd. (“Everest”), and its affiliated companies.