Aggregation of cyber losses is a concern as more property-casualty insurers underwrite the risk, but the “relatively small” size of the cyber insurance market means there’s no immediate financial danger, according to a report from Fitch Ratings.
“As insurers continue to improve and refine their understanding of cyber risks, Fitch expects the industry to broaden coverage and accept larger and potentially more threatening exposures,” the ratings firm said, citing data from ACE Ltd. indicating that cyber insurance premiums are between $1.5 billion and $2 billion worldwide.
Fitch added, “As such, a significant increase in cyber events is not likely to generate insured losses that would represent a substantial threat to the capital position of individual insurers or the industry. Moreover, we believe that most cyber writers have prudently managed cyber risk exposure limits, in part due to limited experience and expertise in underwriting and pricing these risks. Thus, even under an extreme scenario today, we believe that losses would be relatively manageable for providers directly covering cyber threats.”
However, Fitch also noted that while the costs of data breaches are becoming easier to measure and underwrite, the insurance industry faces another problem. A major cyber attack that produces insured losses under other insurance policies, such as commercial general liability, business interruption, and professional liability presents more of a puzzle, according to the firm.
Fitch added that it expects global demand for cyber insurance to increase, particularly if the European Union issues directives requiring more reporting of data breaches.
Erin is the managing editor of Advisen’s Front Page News. She has been covering property-casualty insurance since 2000. Previously, Erin served as editor-in-chief of The Standard, New England’s Insurance Weekly. Erin is based in Boston, Mass. Contact Erin at [email protected].
