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The growth rate for U.S. insurers’ cyber business is slowing, Aon PLC says in a survey issued Tuesday.
The study, which is based on National Association of Insurance Commissioners statutory filings, found that while the number of insurers offering cyber increased to 184 from 170, premiums grew by 10.3%, to $2.03 billion.
This compares to a 36.3% increase, from $1.35 billion, between 2016 and 2017, and a 35% increase, from $1 billion, between 2015 and 2016.
“Certainly, it can be challenging to maintain annual growth rates in excess of 30%,” said the report U.S. Cyber Market Update, 2018 U.S. Cyber Insurance Profits and Performance, June 2019.
“Yet the markedly reduced growth in 2018 gives pause and causes us to question whether the cyber insurance industry can live up to the aggressive growth projections that have been made,” said the report.
The market became more concentrated in 2018, with the top five cyber insurers accounting for 53% of direct written premiums, up from 51% in 2017, and the top 10 accounting for 70%, vs. 69% in 2017.
In comparison, the top 10 writers of other liability claims made insurance account for 60% of premium and the top 10 in commercial multiperil account for 47% of premium, the report said.
The industry reported a 35.4% loss ratio for cyber, compared with 32.4% in 2017, 47.6% in 2016 and 41.5% in 2015.
However, “Individual insurers saw loss ratio results both higher and lower than the average of 35.4 percent – some notably so,” with loss ratios among underwriters with at least $5 million in direct written premium ranging from 4.8% to 184.4%, the report said.
The 2018 loss ratio was primarily because of an increase in claim frequency, with the average claim frequency across all companies 4.2 claims per 1,000 policies, up from 3.5 in 2017, according to the study.
“This jump in frequency more than offset a reduction in the claim severity,” said the report, with the average claim size falling from $56,688 in 2017 to $50,401 in 2018.
“This shift toward higher frequency and lower severity reflects many of the claims stories of 2018,” including increased activity in ransomware and other activity.
Claims against first-party coverage accounted for 68% of all claims, the study said.
The report said one relative bright spot in 2018 growth was in the small commercial cyber space. Because the NAIC data does not neatly allow segmentation by company size, Aon focused on insurers it believes are focused primarily on small commercial accounts and aggregated that group’s results.
It concluded these small commercial writers wrote $458 million in premium in 2018, an 18.7% increase from 2017.
The study does not reflect U.S. business written by non-U.S. insurers and provides an incomplete picture of U.S. insurers that write internationally, according to the report.
India-based Tata AIG General Insurance Co. Ltd. said that its cyber insurance policies' uptake grew 42% while cyber premiums volume increased 27% so far this year driven by demand among banks and financial firms, Moneycontrol reported. Sushant Sarin, an official at Tata AIG General Insurance, said that new regulations, emphasis on data protection strategies and increasing frequency of cyber attacks helped drive cyber insurance uptake among the firms.