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The cyber insurance market is seeing changes in how coverage is purchased, according to a survey released by PartnerRe Ltd. and Advisen Ltd. on Wednesday.
The 2018 Survey of Cyber Insurance Market Trends showed that some 70% of respondents are seeking a stand-alone policy as opposed to coverage by endorsement as buyers seek dedicated limits, higher limits and expanded coverage, the survey said.
“In last year’s survey, underwriters and brokers reported a shift from cyber endorsement to stand-alone policies, a shift that has continued over the past year, highlighting the value of a dedicated cyber insurance market,” the survey said.
Fully 90% of those responding said the cyber insurance market was more competitive in 2018 than in 2017.
Headline news continued to be the single largest driver of cyber insurance purchase.
“The primary reason for buying cyber coverage, as in previous years, was in response to news of cyber events,” the survey said
Buyers are also securing cyber coverage due to third-party requirements, with 42% of respondents saying this was a top driver of cyber insurance buying.
A third of the respondents said regulatory change was also a leading reason for the purchase of coverage.
The survey also showed that 90% of new-to-market buyers are small and medium-sized businesses.
The greatest deterrent to purchase has to do with understanding exposure, the survey said.
“For both underwriters and brokers, the primary obstacle to sales continues to be a lack of understanding about the exposure; 75% of respondents felt that organizations simply don’t understand their exposure,” the survey said.
The survey queried 270 brokers and 70 underwriters, primarily from North America, but there was also a representative international presence, the survey said.
Capacity is improving and is not the challenge for buyers it was just a few years ago, according to sources at PartnerRe.
“While capacity may have been a concern several years ago, we no longer see it as a major issue today,” Andrew Laing, vice president and senior underwriter of cyber property/casualty North America for PartnerRe, said in an email to Business Insurance.
“Looking at the limits, some large companies are able to build in a cyber tower, with the largest currently in excess of $600M,” he said. “We believe that all but a handful of purchasers have access to the capacity they need.”
Some individual markets/facilities are able to offer $100 million limits, he said, generally with syndicated backing, which was not the case as recently as a few years ago.
As well, many of the newer customers from the small and midsize business ranks require smaller lines.
“Small and mid-size businesses (SMBs) typically buy smaller limits than major accounts, in line with their relative exposure profiles,” Mr. Laing said in the email.
“There are no meaningful signs of a capacity crunch,” said Christopher McEvoy, London-based senior underwriter of specialty casualty, cyber property/casualty Europe, within the reinsurer’s Europe property/casualty division. “The SMB market is generally performing well and new entrants are coming into the space in local markets. We’re seeing this particularly in Europe, where it is viewed as attractive business.”
The cyber insurance market is bifurcated, A.M. Best Co. said in a report issued Friday.