Cyber rates to continue rising: A.M. Best
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The cyber insurance market will continue its upward pricing momentum in the medium term in COVID-19, amid rising frequency and severity of claims, A.M. Best Inc. said in a report Tuesday.
Even before the pandemic, rates in the cyber market were increasing by 4% to 5%, due to insurer concerns on growing ransomware attacks and data breaches, the Oldwick, New Jersey-based rating agency said in the report.
The number of cyber claims doubled to 18,000 in 2019, from 9,000 in 2017, A.M. Best said in the report.
Stand-alone direct paid loss and defense and cost containment ratios also rose for the third consecutive year to 32.5% in 2019, according to Best.
“Claims are growing exponentially, which will be an issue if prices cannot keep up with rising frequency,” Best said.
Protracted litigation demonstrates that cyberattacks can have a longer tail than expected and underscores the importance of managing silent cyber, Best said in its report.
“The frequency and severity of ransomware attacks have escalated, with municipalities such as Atlanta and Baltimore becoming prized targets,” the report said.
Attacks on the health care industry also continued to grow in 2019, with health care data in highest demand for sale on the dark web, and the severity of ransomware claims increased, Best said.
Citing CoveWare data, Best noted that the average ransom payment increased to $84,116 in the fourth quarter of 2019, up 104% from the third quarter.
Insurer pricing strategies remain “underdeveloped,” as they rely on rule-of-thumb processes such as revenue and number of records, as opposed to actuarial data, to come up with prices, Best said.
More insurance and risk management news on the coronavirus crisis here.
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