Companies in the market for cyber insurance should expect higher prices for the foreseeable future, according to recent analyses.
Professional services firm and insurer Aon predict cyber insurance prices will rise between 20% and 50% during the rest of 2021.
The frequency and severity of cyber losses rose significantly in 2020, with some clients seeing eight-figure ransomware losses, Aon’s analysis found.
Cyber insurance prices had been rising, but pricing began a steeper shift upward at the end 2020, with primary layers jumping an average of 15.8%, according to Aon.
In response to loss trends, insurers are adjusting their underwriting approach, Aon said.
One development is that insurers are closely reviewing third-party vendor costs incurred to investigate and respond to cyber incidents. Insurers are demonstrating less flexibility in the use of non-panel or pre-agreed vendors, Aon found.
A recent Gallagher Re report also predicts higher cyber rates, with average price increases of 40%.
“While there is talk of a hard market in other classes, the cyber market is undeniably already in one with nothing to suggest the current status quo will be likely to change for quite some time,” the Gallagher Re white paper said.
According to the Gallagher report, demand for cyber insurance has outstripped supply in both the primary and reinsurance markets.
“It all comes down to ransomware,” said John Menefee, cyber risk product manager for Travelers, during Advisen’s Cyber Risk Insights Conference. “It’s driving the majority of losses, and the threat actors are getting bolder in their demands. The frequency’s increasing, severity’s increasing.”
Insurance companies have a crucial role in using data from thousands of claims to educate insureds on implementing cybersecurity changes in order to stop cybercriminals.
Chivaroli and Associates Insurance Services is a full-service brokerage firm specializing in the custom-design and placement of insurance and alternative risk funding solutions for your healthcare organization.