Ransomware attacks, the increase of remote worker cyber and data security risk exposures, and security vulnerabilities have shaken up the cyber insurance industry. This has increased the demand for cyber insurance, limited carrier’s capacity and has caused higher rates due to the high volume of claims all carriers are dealing with.
Most cyber insurance policies have experienced 20-50% price increases this year or are being non-renewed by carriers that have had a change of underwriting guidelines.
Indeed, cyber insurance premiums are increasing as insurance carriers’ payouts continue to rise.
The law of supply and demand is complicated as it relates to cyber insurance. Typically, the law of demand says that at higher prices, buyers will demand less of a product, and the law of supply says that at higher prices, sellers will supply more of a product. Due to the current cyber risk environment, the supply and demand curve of cyber insurance is operating in reverse.
According to the NAIC (National Association of Insurance Commissioners), if a product is priced too low, an insurer may not have the financial means to pay claims to the policyholder, which could lead to insolvency. If priced too high, few businesses and consumers might be able to afford the coverage.
Factors Affecting the Supply of Cyber Insurance
- High volume of claims due to the current risk environment
- Higher insurer losses from increasingly frequent and severe cyber attacks, such as ransomware demands
- Increased demand for cyber insurance
- Higher incident response provider costs
- Healthcare breach costs have surged
- Lack of historical data on cyber attack related costs
- Riskier industry sectors have led insurers to reduce cyber coverage limits and increase premiums
- Risk of aggregated losses from a cyber attack, which could result in many businesses simultaneously making claims, posing a solvency risk for insurers
- Cyber reinsurance rate increases on the insurer’s side
- Growing sophistication of hackers
- Stricter underwriting
- Strict security assurances and requirements
Factors Affecting the Demand of Cyber Insurance
- Ransomware attacks and demands
- Data breaches
- Cyber attacks
- Security threats and vulnerabilities
- Cyber crime
- Contractual agreements that require cyber insurance
- High incident response costs in the event of an incident
- Cyber risk mitigation
- Supply chain cyber risk
- Network interruption which causes loss of business revenue
- Regulatory environment
- Legal action risk exposure in the event of an incident
- GDPR, CCPA and BIPA
Cyber risks are evolving, and cyber insurance providers are certainly working hard to keep up with the pace. Unfortunately, there seems to be no slowdown in sight for cyber insurance premium increases.
Buckle up your cyber security, as it is going to be a bumpy ride for the unforeseeable future.
For help with your cyber insurance coverage needs, please contact us for assistance or request a cyber insurance quote.