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Stand-alone and package cyber premiums combined grew by 54% to $2.1 billion in 2017, while the industry benefited from strong profitability, said Fitch Ratings Inc. in a special report issued Wednesday.
“Cyber insurance coverage continues to represent a significant growth opportunity” for U.S. property/casualty insurers, says the report by New York-based Fitch. It states that stand-alone cyber direct written premium alone grew by 7% to $986 million in 2017.
The reports says about 3.3 million package cyber policies in force were reported in 2017, up from 2 million in 2016. “Growth in cyber premiums is largely a function of underwriters addressing the emerging issue of ‘silent’ cyber risk, under which an existing commercial insurance policy may provide cover for claims relating to a cyber event, despite any explicitly stated terms relating to cyber in the policy,” the report says.
“Many underwriters and policyholders are actively trying to address this ambiguity in coverage by adding cyber within existing package policies and adding specific terms and premiums,” it says.
The report states the industry statutory direct loss ratio for stand-alone cyber insurance fell to 35% in 2017 from 43% in the prior year. “While direct results do not incorporate all claims and underwriting expenses, or the effects of reinsurance, this result is indicative of strong underlying profitability thus far in the cyber market,” says the report.
It warns, however, about the prospect of naïve capacity, attracted by favorable results, entering the market. “Often these companies rapidly grow premiums without sufficient underwriting, claims, and product expertise, setting the stage for some carriers to suffer outsized losses from cyber insurance,” it states.
Competition and low investment yields are making life difficult for insurers and reinsurers, Fitch Ratings Inc. said Monday, particularly in the United States and the United Kingdom.