Decrease in cyber insurance premiums reported according to latest findings
In the ever-evolving landscape of cybersecurity, a significant development was observed in 2024 as cyber insurance premiums experienced a decrease. According to a report by credit rating agency AM Best, cybersecurity insurance premiums decreased by 2.3% year over year, totalling approximately $7.1 billion. This marks the first year since 2015 that there has been a decline in premiums generated from cyber insurance.
The decrease in premiums was primarily due to pricing changes rather than changes in risk exposure. AM Best identified several possible reasons for this decline, including increased market capacity, improved risk management and data, competitive market dynamics, and evolving underwriting sophistication.
One of the key factors contributing to the premium decreases is the increased market capacity and limits. Companies like Resilience doubled their cyber insurance limits from $10 million to $20 million per client through partnerships with Lloyd’s, indicating greater available capacity and improved risk-bearing ability in the market.
Insurers and cyber risk solution companies are also integrating advanced AI platforms and continuous client engagement to mitigate cyber risks, which likely reduces expected losses and thus premiums. This improved cyber risk management and prevention solutions further contributes to the decreased premiums.
The market competition and pricing pressure also play a significant role. Reports show that premium rates have softened, with some lines in property insurance seeing double-digit reductions, signaling a more competitive market environment that also affects cyber insurance pricing.
While cyber claims, especially ransomware and litigation-related losses, continue to evolve, better actuarial data and experience in underwriting cyber risks after years of ransomware prevalence allow for more accurate pricing and potential premium adjustments.
The cyber insurance sector relies heavily on reinsurance. Stable or increased reinsurance capacity supports premium reductions, but changes in capital allocation remain a vulnerability.
Despite the decline in premiums, the cyber insurance market remains profitable, as the loss ratio (proportion of premiums used to pay out claims) remained below 50%. This indicates that the market is still generating more revenue than paid out in claims.
The question corporate stakeholders want to answer is: Are we a target? As companies with complex webs of third-party vendors face diverse and difficult-to-manage cyber risks, part of a good cyber hygiene strategy should include due diligence on third-party vendors and anticipation of scenarios involving vendor breaches.
The top five cyber insurers by annual premiums remained unchanged in 2024, with Chubb maintaining its top ranking, Fairfax Financial holding onto third place, and Travelers Group jumping from fourth to second. The Hartford, Erie, and Berkshire Hathaway held the most policies in 2024. Some large businesses may be creating their own captive insurance companies to manage their cyber-risk exposure, a practice known as self-insurance.
In conclusion, the premium decreases in 2024 are driven by increased market capacity, improved risk management and data, competitive market dynamics, and evolving underwriting sophistication, as reflected in AM Best-related market activity and commentary. Despite the decline in premiums, the cyber insurance market continues to grow, reflecting ongoing interest from corporate stakeholders in understanding the risk calculus of their technology stacks.
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