Insurers are facing tighter margins and larger losses as they place a greater reliance on reinsurance.
As risks rapidly rise, cyber insurance companies are watching their losses rise and their margins tighten. At the same time, insurers are placing a heavier reliance on reinsurance to mitigate their own risks.
Though the coverage is becoming essential for businesses, it is dropping in appeal for insurers.
For many businesses, cyber insurance is becoming harder to find. In fact, even compared to just one year ago, it’s more difficult to find affordable coverage. The reason is that cyberattacks and ransomware attacks have exploded and businesses, organizations and governments are all vulnerable.
The average ransomware payment rose by 82 percent between 2020 and 2021. By mid-2021, the number of ransomware attacks had already increased by over 150 percent when compared to all of 2020 according to data cited in a recent hbr.org report. This has had a substantial impact on the entire industry. Rising attacks and payouts have meant that insurers have faced greater losses. The expense and volatility have reduced the appeal from this emerging business class.
The cyber insurance market is seeking ways to remain a viable one even despite the challenges it presents.
The report pointed to a substantial need for a new pool of capital in order to address the large, possible, though typically unlikely cyberattacks that can be catastrophic to a company or multiple companies, costing millions of dollars in insured payments.
That new capital pool, said the report, would be helpful to insurers in better managing the risk and providing them with additional wiggle room for writing new policies. It stated that insurance linked securities (ILS) would provide the industry with necessary growth.
The report estimated the worldwide premiums total for cyber insurance policies to be around $5.5 billion. That is a notable increase over the total from the year before, which was closer to $5 billion.
Though that appears to be important growth, even with a 10 percent increase yar over year, many insurers have found that they must purchase more coverage than they had the year before, watching their premiums rise by 25 to 75 percent, depending on the nature of the insured business.
