The last few years have been turbulent for the Cyber Insurance market.
- The COVID-19 pandemic spurred a rise in cyber attacks. Businesses’ rapid adoption of remote work drastically increased the attack surface.
- Russia’s invasion of Ukraine heightened fears of cyber warfare waged through malware and distributed denial-of-service (DDoS) attacks.
- Several spectacularly costly cyber incidents cut into Cyber insurers’ profitability. These incidents made an already hard market “brittle, to the point of breaking,” as Security Management’s Kevin Sesock summed up the situation. Cyber Insurance premiums surpassed $7.2 billion in 2022—51% higher than the year before.
Fortunately, 2023 has seen more stability in the Cyber Liability Insurance market. This stability spells good news for your business clients and your brokerage since premiums have slowed their meteoric rise.
But don’t let cooling rates lull either of you into complacency. Malicious cyber activity is still red-hot, making Cyber Insurance as necessary and urgent an investment as ever.
Why Have Cyber Insurance Premiums Been Stabilizing?
Additionally, the rate of Cyber renewal premiums decelerated substantially, per Fitch Ratings, “with a 15% sequential-quarter increase in 4Q22 down considerably from a record 34% increase in 4Q21.”
Contributing factors to these trends include:
- Moderation of ransomware events
Reported ransomware attacks, the combined value of ransom payments, and businesses’ likelihood of making ransom payments all fell in 2022.
- Greater executive awareness of cyber risk
Business leaders are talking more about cyber threats. While concrete solutions don’t always emerge from these conversations, decision-makers no longer neglect the issue.
- Stricter enforcement of cyber hygiene standards
Cyber Insurers have become more vigilant in demanding their insureds follow such cyber security best practices. Multifactor authentication (MFA), regular software patches and system updates, and employee training are all on the rise.
Will the Cyber Insurance Market Continue to Grow?
Even as premiums stabilize, Fitch Ratings reports the environment for Cyber Liability claims “remains more uncertain relative to other property/casualty products, in part due to the rapid pace of technological change and potential for new types of cyber incidents.”
In other words, cyber criminals continue to evolve their tactics. With each passing day, cyber criminals are finding new ways to exploit vulnerabilities and target organizations.
And although ransomware attacks fell in 2022, they remain a significant and expensive risk. In the first half of 2023, ransomware drove a major increase in Cyber Insurance claims, up 12% over the first half of 2022 with an average loss of more than $365,000.
Consequently, even as premiums stabilize, experts expect the Cyber Insurance market will continue to grow for the foreseeable future. Fortune Business Insights projects the market will grow from $16.66 billion in 2023 to $84.62 billion by 2030.
Again, as awareness of the potential financial losses inflicted by a cyber attack grows, so does the demand for Cyber Liability Insurance. Insurance providers are capitalizing on this demand by offering more specialized products. They tailor solutions to meet the unique needs of a wide range of businesses and organizations.
How Will You Help Your Clients Secure Their Cyber Coverage?
The costs associated with a cyber attack can be staggering. They include expenses related to:
- Business interruption, including lost revenue
- Incident response, including notification of affected parties (customers, vendors, and others)
- Forensic investigation
- Data restoration
- Public relations efforts, including provision of credit monitoring services to parties whose sensitive data was exposed
- Legal expenses, including regulatory fines, defense costs, and potential settlements or judgments
Cyber Liability Insurance provides financial protection and helps organizations recover more quickly from the financial setbacks a cyber incident causes.
While business leaders may not welcome the upfront expense of Cyber premiums, even as those premiums have moderated, their cost pales in comparison to the average cost of a cyber incident.
The smart decision is clear.
Do you need help explaining the Cyber Insurance market to your clients or making the case for paying premiums that could defend their business from devastating consequences?
Download our free report, Know Why Cyber Insurance Premiums Are Increasing.
While Cyber Insurance premiums aren’t currently increasing as much as they recently were, our report can still help you explain:
- What variables contribute to the determination of Cyber premiums.
- What businesses can do to mitigate their risk and lower their premiums.
- What value Cyber Insurance policies provide in the event of a breach or other incident.