Cyber underwriting profitability varies by segment: Report

Cyber underwriting profitability varies by insurance segment, says a Keefe Bruyette & Woods Inc. report issued Friday.

Professional liability lines, including cyber coverage, are reporting loss ratios of about 115%, according to the report by the New York-based investment banking firm. The report said about $1.5 billion of the $3.25 billion in current cyber premiums are within professional liability coverages.

In contrast, large-account stand-alone cyber coverages are reporting loss ratios of 40% to 50% and middle market accounts, those of firms with revenues of less than $1 billion, are reporting loss ratios of 10% to 20%.

“Smaller accounts’ low loss ratios reflect the fact that 80% of cyber incidents cost less than $1 million, while only 5% cost more than $20 million,” said the report.

The report said also that smaller account, stand-alone cyber’s very strong underwriting profitability is driving rates down by about 10%, and there are often higher limits.

The report said industrywide, 2018 gross written cyber premium growth should be about 20% to 25%, which is in line with recent year’s growth rates, and is expected to continue at least through 2020.

Fewer than 20% of commercial insureds buy cyber coverage, “implying significant growth potential through increasing penetration,” the report said.

The report said also that policy forms are slowly being standardized.