Moody’s and Amwins expect continued growth in the cyber market

Two organizations recently expressed optimism that the mitigated cyber market that emerged in 2023 will remain favorable going forward. In separate reports, Moody’s Ratings and Amwins Brokerage provided insights into the sector landscape.

Moody’s said the market is “poised for significant growth over the next few years as cyber-attacks continue to grow in number and sophistication, with the potential to cause significant financial and reputational damage and disrupt business operations.”

Amwins reported that since the “significant” change in 2023, which featured more favorable terms for buyers, renewals “often come in at or below expiring prices despite increased claims activity. This change is driven by improved capacity from both new market entrants and existing carriers expanding their offerings, including limits up to $10 million.”

In April, Munich Re estimated that total global cyber insurance premiums stood at about $14 billion last year. Projections show that number will double to $29 billion by 2027.

Moody’s reported that between 2018 and 2022, direct US cyber insurance premiums will more than triple due to higher demand and higher rates. This trend appears to have been reversed in 2023; the volume of premiums remained constant, but the total number of policies continued to increase.

Matt Donovan, executive vice president at Amwins, said cyber insurance has become “an essential component of comprehensive risk management.” Depending on the risk, “an insured can obtain between $750 million and $1 billion in cyber insurance coverage,” Moody’s added.

However, the cyber market is a relatively small part of the property/casualty insurance industry. According to Moody’s, cyber insurance accounts for less than 1% of direct written premiums for P/C in the US

The credit rating organization reported that the companies with the largest percentage of the US cyber market are Chubb (8%), AXA (6.8%), Fairfax (6.4%), Travelers (5.4%) and Tokio Marine (5.3%). The top 20 companies account for approximately $5.5 billion in direct premiums written. This number represents approximately 76% of total US cyber DPW, which is approximately $7.2 billion.

Claims trends

Even as ransomware claims increase, Amwins pointed to mitigating factors such as strengthening defenses and a drop in payouts, which can be attributed to “improved cyber resilience,” including attack defense and attack recovery.

The rise of class action lawsuits related to wiretapping, illegal surveillance, pixel tracking, biometrics and California Privacy Act claims are all trends the industry is watching closely, Amwins said in the report. The brokerage reported seeing “a flood of privacy class action lawsuits related to these areas.”

“Some carriers have taken steps to exclude these claims in their coverage forms,” ​​Amwins said in the report. “Many other carriers provide sub-limits for biometrics and directly preclude any intentional illegal tracking of protected information.”

Amwins has also seen allegations of illegal wiretapping and illegal surveillance, and an increase in TCPA-like lawsuits and solicitation directed at companies for data collection and advertising.

“An increase in ransomware attacks and large losses could drive higher loss rates, keeping prices down, particularly in the US,” Moody’s said in its report. “While losses are likely to increase, we expect the segment to remain profitable in 2024, absent a major catastrophe event.”