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Cyber premiums increased 21% in 2020 from 2019, but insurers’ loss ratio increased as well, a survey found.
U.S. cyber direct written premiums increased to $2.74 billion in 2020, up from $2.26 billion in 2019. The direct incurred industry loss ratio was 67%, compared with 44.9% in 2019, according to Aon PLC’s annual market report on the U.S. cyber market released Wednesday.
The higher loss ratio was primarily because of increased severity, Aon said, pointing to ransomware claims resulting in heightened incident response claims as well as extortion demands.
The report said that, overall, insurers saw modest rate hikes averaging 2.5% in 2020.
The report’s data is based on the National Association of Insurance Commissioners’ statutory filing statement, and the report warns it has an inherent lag of 15 to 18 months.
“As a result, cyber insurers’ experience during FY2020 reflects policies written in 2019 almost as much [as] in 2020,” it says.
“While the sharp rise of loss ratios is bad news, there is some good news as well: Insurers have already had considerable time to respond to the trends now through the NAIC data, in the form of underwriting actions and rate increases.
“Indeed, rates increased significantly in the second half of 2020 and have accelerated further in early 2021,” the report said.