In a digital landscape increasingly fraught with cyber threats, AM Best has provided a measure of stability by assigning a stable outlook to the global cyber insurance segment, reflecting steady progress in managing risks. This outlook is driven by increasing demand and promising intermediate-term growth prospects as take-up rates continue to improve. This is elaborated in the report “U.S. Cyber: Hot Pricing Cools Off and Rapid Growth Stalls,” which examines industry performance and identifies trends in the U.S. market.
Key Insights from AM Best’s Report:
Flat Premium Growth: The report highlights that direct premium written (DPW) growth in the U.S. cyber segment remained flat in 2023, starkly contrasting the rapid growth from 2019 to 2022, where premiums more than tripled.
Rate Reductions: Christopher Graham, senior industry analyst at AM Best, attributes rate reductions to increased market competition and improved cybersecurity practices, leading to fewer claims. This follows a period of sharp rate increases driven by a surge in ransomware attacks during 2020 and 2021.
Claims Severity and Frequency: The report notes a decrease in claims severity, which has more than offset the increase in claims frequency. Calendar year results were stable, indicating a healthy balance in the market.
Impact of Cyber Hygiene: Fred Eslami, associate director at AM Best, emphasized that good cyber practices and heightened cyber hygiene awareness have benefited both insureds and insurers. Despite a 50% rise in ransomware attacks in 2023, the segment’s loss ratio has steadily declined due to improved cyber hygiene and better risk management.
Positive Factors and Future Prospects:
Improved Underwriting Practices: The report cites the continuous improvement in underwriting practices and policy language as a key factor in the stable outlook.
Intermediate-Term Profitability: Ongoing improvements in cybersecurity measures bolster profitability expectations in the intermediate term.
Increased Demand: Eslami predicts that as awareness of cyber risks grows, so will the demand for cyber insurance, contributing to the segment’s expansion.
Challenges Ahead:
Competition and Premium Growth: The report also flags increased competition and modest premium growth in the U.S. as potential challenges that could mirror international trends.
The sophistication of Cyber Attacks: The evolving complexity of cyber threats, including using artificial intelligence in attacks, ransomware, and business email compromises, poses ongoing challenges to underwriting practices.
Get a full copy of the Best’s Market Segment Report on U.S. cyber insurance here.
Get a full copy of Best’s Market Segment Outlook on the global cyber insurance market segment here.
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