Page 53 - Insurance Times April 2023

Cyber Insurance is back from the brink

after onslaught of Ransomware attacks

he cyber-insurance market, battered by a rash businesses have cyber policies, but fewer than 20% have
T of pandemic-era ransomware attacks, is making limits on those policies exceeding the median ransomware
demand, Swiss Re said. The cyber attacks that proliferated
a comeback. Price hikes are moderating, new
carriers and fresh sources of capital are
during the pandemic's work-from-home boom pressured
emerging, and companies can better afford coverage. insurers to become more discerning when writing policies.
Since then, underwriters have fine-tuned their coverage,
Cyber-insurance pricing increased 10% from a year earlier
while clients appear to have sturdier defenses in place.
in January, a fraction of the 110% annual increase reported
in the first quarter of 2022, preliminary data from insurance "The cyber market is continuing to evolve and will continue
broker Marsh McLennan show. If those trends continue, to do so as the threat actors change over time," Aon Plc
prices could be set to decline, said Tom Reagan, Marsh's President Eric Andersen said on a conference call with
cyber practice leader. investors and analysts earlier this month. "When you think
about the cyber market today and where it's going, I would
The reversal would follow a wave of digital intrusions that
say the insurers have actually gone back to basics."
dominated the work-from-home era and forced insurers to
recalibrate both how they write policies and their risk Bowhead Specialty Underwriters Inc. also started writing
appetites. Those attacks also pushed their clients to adopt cyber policies in 2022 after the firm decided the coverage
stronger cybersecurity measures. The brutal conditions in would align well with its other lines of business, according
to Chief Executive Officer Stephen Sills. "There was a relative
the market have let up since then, with claim frequency
declining in the fourth quarter of 2022 even as severity shortage of capacity for a while," Sills said in a phone
interview. "There's a belief on our part that the amount of
remained elevated, according to Marsh.
claims and the number of severe claims has dropped of late."
"What we're left with is a very, very, very different market
Newcomers coming into the market are creating "a lot
than what we went into two or three years ago," said Paul
more competition," according to Adam Lantrip, who leads
Bantick, the global head of cyber risks at London-based
the cyber insurance practice at brokerage CAC Specialty.
insurer Beazley Plc. "We have a mature market that has
That's helping rates to normalize while allowing companies
stood up against a huge test."
to rebuild the stack of insurance policies they use to protect
The risks posed by cyber criminals are still enormous.
themselves against an attack.
Ransomware attacks against industrial organizations
It's not just new entrants bringing more capital to bear on
increased by 87% in 2022 from the year before, while the
the market. Beazley launched a $45 million cyber
US Treasury Department said financial institutions flagged
catastrophe bond in January that it touted as the first of its
nearly $1.2 billion in likely ransomware-related payments in
kind. The security is meant to protect against a widespread
2021. Recent high-profile breaches at financial services firm
event that inflicts more than $300 million in losses - the sort
ION Trading UK and a major Asian data center emphasized
of attack that would represent a major threat to the
the grim risk posed by hackers.
industry. The issuance points to how much the market has
Even so, the total amount extorted from ransomware victims matured, and how insurers are continuing to think about
in 2022 dropped to $456.8 million from $765.6 million the how to innovate in the space.
year before, according to data from Chainalysis.
"We want to be there for the future. We want to be a
The cyber insurance market is primed for growth amid that sustainable business," said Michela Moro, a regional cyber
uncertain backdrop. Reinsurer Swiss Re AG said in a report head with insurer Allianz SA. "That's definitely had an impact
late last year that insurers worldwide wrote $10 billion in on the way we handle the underwriting process but also how
cyber premiums in 2021. The firm estimated that figure is we try to provide support and thought leadership for our
set to exceed $23 billion by 2025. More than half of clients." (Source: Mint)
46 April 2023 The Insurance Times