Advisen Loss Insight: Headlines from the Cyber Risk Network

Advisen’s Cyber Risk Network has really been an exciting and challenging endeavor for us since the risk is forever evolving … as many are well aware as you continuously attempt to wrap your arms around it. Indeed, no industry is immune to cyber risk and it seems no line of insurance is completely untouched. This week’s Data Spotlight excerpts portions of a presentation by Chad Hemenway, managing editor, given at Advisen’s Cyber Risk Insights Conference in Chicago.

Members can download the slides above, as well as see conference video here.

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What I love as a journalist working at Advisen is our data. I’ve always struggled to find it from outside sources to add to my news reporting — particularly on cyber. Here, I can find data right in our vast databases: Loss, Policy and Market Insight.

As this graph shows, US premiums written were about $1.3 billion in 2012, growing to $2.1 billion in 2014. Advisen estimates the market to reach around$2.4 billion by the end of 2015. By extrapolating, we can expect a cyber insurance market of about $5 billion by 2020.

Is this conservative or a reach? I’m not sure. Plenty of factors are involved, right? We hear of promising take-up rates as organizations realize their exposures. You may get much more confident in your underwriting and pricing…which I hear is occurring. Throw in the competition variable since everyone seems to be getting in this game. Will the SMBs be tapped more as the sales pitch is fine-tuned? And have we really had that market-shaking, systemic catastrophic loss yet?

Advisen holds data on the top carriers in cyber, by premiums and by policy count. There are an estimated 50-60 insurers offering standalone cyber insurance.

One leading carrier—AIG—has seen cyber grow 30 percent over the last three years. They’ve also seen a rate of claims increase to 5 every 2 business days.

But look at what these graphs say about the competition in this market. (If they are inaccurate, I expect to hear from you.) We break out the top 8 here. Which means the remaining 42-52 providers of cyber insurance are fighting for the “others” slice of this pie. They are also fighting over the same service providers and partners to be able to appropriately offer insurance for cyber risks.

2014 was been dubbed The Year of Breach. Last year certainly continued an upward trend in event frequency. 2015 seems to be off to a pretty good start as well. As a part of getting a grip on losses—and figuring out if this risk can ever be modeled in some way—claims are needed. There’s interest in being able to quantify the services many policies offer and how valuable they are to mitigating loss. We need quantifiable data–not anecdotes.

This last graph speaks to buyer loyalty. Last year, 94 percent of policyholders renewed with the same insurer. This is an improvement over 2013, but lower than renewal rates since 2008.

The green line indicates premiums at renewal with those who renewed with the same insurer. These policyholders appear to grasp the value in their relationship with their insurers. Those with point-of-sale exposure may throw this off in the future.

The red line indicates a difference in premium for those who switched insurers at renewal and we see a little more movement here. Whether they are getting what they pay for remains to be seen.

See the presentation >>