Cyber Insurers Say Underwriting Is Profitable, For Now

Carriers say that cyber insurance is quite profitable for them at the moment, and a majority are also using reinsurance to manage their exposures, PwC found in a global survey of specialist writers.

The consulting firm’s survey found that 80 percent of respondents reported they’re writing cyber insurance with combined ratios lower than 80 for the most recent 12-month period. PwC noted in its report on the responses that this highlights “the current profitability of these books.”

PwC added that most respondents’ actual combined ratio is either better than or in line with their initial target. What that means is that most respondents made their target premium level. Also, carriers seem to have a healthy appetite to grow their cyber books, PwC said.

Nothing lasts forever, however, and that could be true for the cyber insurance market’s current healthy state, PwC said.

“New market entrants and competition are likely to erode it,” PwC said in its survey report. “The insurance industry has yet to experience a major and systemic cyber catastrophe event. Accordingly, we note that reserves and claims may develop adversely in time, and future profitability may be lower than insurers currently expect.”

Carriers are also worrying more about potential “silent cyber” claims and how these issues could affect current reserve levels.

The other noteworthy PwC finding: More than 75 percent of insurers are using reinsurance to manage their cyber exposures.

The surveyed carriers showed a greater appetite for proportional reinsurance, “where reinsurers can rely on a cedants’ underwriting expertise to create an alignment of interest, rather than model results they do not trust.”

Furthermore, PwC said, “in some instances, cyber exposures will be covered on a non-proportional basis through property insurance, directors and officers, and E&O programs, where cyber acts as an ancillary exposure.”

Most respondents said they had claims data from incidents such as data breach, ransomware, malware and phishing, with the average number of available data going back seven years.

Companies are most worried about cyber-related business interruption/contingent business interruption because it has a potential systemic impact.

The report is: “Are insurers adequately balancing cyber risk and opportunity?”