Although the market for cyber insurance remains in its infancy, the business is growing rapidly, according to a new report from Fitch Ratings Inc.
The credit-rating agency reports that direct written premium volume for cyber insurance grew by 35% in 2016 to US$1.35 billion.
“Take-up rates for cyber insurance are increasing with frequent reports of computer hacking incidents, including network intrusions and data theft as well as high-profile ransomware attacks that are leading corporations to search for broader insurance protection against cyber threats,” says Jim Auden, managing director with Fitch, in a statement.
The largest underwriters of cyber insurance are American International Group (AIG) Inc., XL Group Ltd. and Chubb Ltd., which have a combined market share of approximately 40% as of the end of 2016, according to the report. Furthermore, it notes that the top 15 firms have approximately 83% of the market combined.
The report also notes that the insurance industry’s direct loss ratio for stand-alone cyber insurance improved in 2016. However, it cautions that the profitability of cyber insurance “will take some time to assess as the market matures and future cyber-related loss events emerge.”
“Future growth in cyber premiums will likely come from more consistent polity terms and conditions as insurers gain better understanding of loss potential and coverage, better cyber underwriting models, as well as efforts to comply with increased cyber regulatory standards across numerous industries, particularly financial institutions,” Auden adds.