Aon’s fourth edition of its US Cyber Market Update report, 2018 US Cyber Insurance Profits and Performance, has highlighted an increase in total cyber insurance premiums to US$2.03 billion during the last 12-month period.
The report, which provides insights, benchmarks and analyses for established and prospective cyber insurers, revealed that a total of 184 US insurers reported direct cyber written premium to the National Association of Insurance Commissioners (NAIC) in 2018 – up from 170 the previous year.
On the whole, cyber insurance was quite profitable for US insurers in 2018: US cyber premiums grew to $2.03 billion – an approximate 10-per-cent increase from 2017; premiums from package business grew modestly, rising six per cent year-on-year; standalone cyber premiums grew by 14 per cent; and premiums for small commercial-focused cyber insurers grew 19 per cent.
In addition, the direct incurred industry loss ratio across all cyber policies was 35.4 per cent during the period, with standalone and package business reporting 34.4 per cent and 36.8 per cent respectively. Compared to 2015-2016 levels, loss ratios for 2018 remained modestly low, and the deterioration was primarily due to an increase in claims frequency, averaging 4.2 claims per 1000 policies in 2018, up from 3.5 in 2017. This jump in frequency more than offset a reduction in claims severity, for which the average claim size decreased from $56,688 in 2017 to $50,401 in 2018. This shift toward higher frequency and lower severity reflects many of the claims stories of 2018, including increased activity in ransomware, crypto-jacking and form-jacking claims.
Jon Laux, Head of Cyber Analytics for Aon’s Reinsurance Solutions business, said: “The main cyber story of the 2018 financial year is arguably that there was a lack of a story. US insurers, whilst still achieving good average growth during the 12 months under review, were shown to be growing at a slower pace than the preceding periods, where in both 2016 and 2017 growth rates were above 30 per cent.” He added: “One relative bright spot in 2018 was the small commercial cyber space, where growth is now well underway. SME risks have been highly desirable to insurers given that cyber claims frequency and severity are both lower for smaller companies.”
All in all, the 2018 US Cyber Insurance Profits and Performance report found that the US cyber market became more concentrated in 2018. The top five cyber insurers accounted for 53 percent of direct written premiums, an increase from 51 percent last year, and the top 10 accounted for 70 percent, versus 69 per cent last year. This was a notable change from 2017, where smaller participants grew more rapidly than the market overall.
Read the full report here.