Global brokerage Marsh is cautiously optimistic cyber’s hard market will eventually stabilize and insurers will soon be able to reward clients who have strong cyber controls with lower increases.
“Market conditions are expected to remain challenging for the foreseeable future given ongoing accumulation and systemic risk concerns,” reads Marsh’s Q2 2022 US and Canada Cyber Market Update. “But there is an increasing sense of cautious optimism that the steep rate increases of the past several quarters are moderating as attritional losses are better controlled and premium growth exceeds incurred losses.
Demand for coverage among new buyers in Canada has considerably increased, Marsh reports, with clients’ cyber coverage purchases through Marsh going up from less than 4% in 2014 to more than 20% last year.
However, the frequency and severity of cyber claims reported by Marsh clients remained high in the first quarter of 2022 — consistent with trends seen over several quarters.
“Persistently high claims rates have accelerated pricing pressures, and even clients with no losses and good cyber hygiene controls have seen rate increases during the past several quarters,” reads Marsh’s market update.
But while rate increases continue to challenge some clients, Marsh figures the market is entering a rate stabilization, upon observing consistent downward movement from the record rate increase of Dec. 2021 in both the United States and Canada.
In Canada, cyber loss ratios are up this year over last, based on financial data from the Office of the Superintendent of Financial Institutions (OSFI).
In 2022 Q1, the cyber liability claims ratio for federally-licensed cyber insurers was 169%, with net premiums earned of $77.9 million and $132.3 million net claims incurred, according to OSFI.
Comparatively, last year the industry’s cyber liability claims ratio was 109.8%, based on $42.8 million net premiums earned and $47 million net claims incurred.
Marsh notes that although rates are still on the rise, the cyber market is becoming more moderate.
But that won’t mean lower increases for all clients. “Lower increases typically are only offered to companies that can demonstrate strong cyber risk controls as underwriters become more selective about the risk they are willing to cover,” reads the market update.
Companies that haven’t made cybersecurity improvements deemed necessary by underwriters will continue to face challenges, including higher rate increases, restrictive terms, lower sub-limits or excluded coverage.
Forty-one per cent of 650 cyber risk leaders in Marsh’s 2022 Marsh and Microsoft Global Cyber Report say their insurers’ requirements influenced their company’s decision to improve upon or adopt new cyber controls. their cyber controls.
“As companies continue to focus on and improve their cyber hygiene controls, insurers can be expected to calibrate their underwriting and pricing strategies on an account-by-account basis — rather than on a portfolio-basis — and reward clients with strong cyber hygiene,” reads the update.
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