Insurers have reduced cyber capacity limits on single risks while premium rises are set to continue after gains of 15-20% in Australia last year as demand for cover accelerates, Marsh says.

Limits on any single risk are being capped to $10-$15 million in a majority of instances, well down from previous years when it was common for limits of up to $50 million to be provided.

Based on Marsh client data, the number of Australian cyber insurance policies placed grew by almost 20% last year and the premium placed jumped 51% driven by new policies, rate rises and clients purchasing higher limits.

“Interest for cyber insurance from new buyers in the local market continues to grow,” the Cyber Insurance Market recap for Australia says.

“Manufacturing, transportation and logistics, professional services firms and government entities are amongst some of the new buyers of cyber cover in Australia.”

A few global insurers have exited the cyber market as profitability pressures increase but relatively healthy competition remains for new business.

Last year saw a decline in claims frequency, but a rise in claims related to work-from-home IT setups, while claims severity increased.

Global trends show the average ransom payment increased 60% in the second quarter, while in the third quarter the global average ransom demand was officially reported at $US233,817 ($302,840).

Marsh says the figure continues to climb and more recent observations suggest average extortion payments are now in a $US1-5 million ($1.3-6.5 million) range.

Insurers have also faced challenges as cyber attacks move beyond data breaches to schemes capable of disrupting business and supply chains, creating “silent cyber” risks and demand for solutions that minimise gaps between property, casualty and cyber programs.

“Non-cyber insurers were challenged with navigating through claims stemming from cyber risks that had not been expressly excluded under the policy, but also had not been intentionally underwritten or priced for,” Marsh says.

Further cyber rate gains are expected in the Australian market this year as insurers aim to maintain sustainability and profitability against the backdrop of increasing claims.

Insurers will also likely actively manage their aggregation and capacity to protect portfolios and may make coverage changes or apply sub-limits and coinsurance if the claims situation worsens, the report says.