Competition grows as insurers target US cyber market
The fast-growing US cyber-cover market is increasingly competitive as insurers seek profitable expansion.
Standalone and package cyber premium grew 54% to $US2 billion ($2.7 billion) last year, according to a Fitch Ratings report.
Insurer Allianz projects the market could reach $US20 billion by 2025.
Ratings agency Fitch says the statutory direct loss ratio for standalone cyber insurance fell to 35% last year from 43%, indicating strong underlying profitability in the wider cyber market.
“Profitable results in a new market are attracting competition to the cyber space,” Fitch MD James Auden said. “Roughly 75 distinct insurers wrote more than $US1 million ($1.3 million) each of annual cyber premium last year alone.”
Increasing numbers of cyber attacks and regulatory requirements are fuelling demand, but Fitch says underwriting results are likely to weaken as exposure grows and more incidents are covered.
“From an individual underwriter perspective, the risk of naive capacity entering the market, growing rapidly without sufficient expertise and ultimately suffering outsized losses… is an expanding possibility,” Fitch director Gerry Glombicki said.
Growth in package-related cyber premium reflects insurer efforts to include cyber coverage and endorsements in policies that may hold cyber exposure but that lack explicit policy terms or premiums related to the risk.
Some of the growth also reflects variability and changes in the way cyber premium is reported.
Standalone cyber premium grew 7% last year to $US986 million ($1.3 billion).
In standalone and package cover combined, Axis Capital held a 16% direct market share,
Chubb 15% and AIG 11%. For standalone cyber, AIG was the largest writer.