Ransomware losses continue to drive rate increases and capacity concerns in cyber
Cyber lines are seeing “a massive hike” in claims driven largely by ransomware attacks, up 17% in the US, 13% in Asia and 36% across EMEA, according to Gallagher. The broker’s Cyber Major Loss and Market Update for the firsts half of 2021 notes that nearly 62% of all cyber insurance premiums are ceded to reinsurers – one of the highest proportions for any class.
The report published this month reviews changes to the market in the first half, starting with the cyber treaty renewals for 2021. In the fourth quarter of 2020, 91% of its cyber clients saw rate increases, with 45% seeing increases of more than a fifth.
“The 1 January 2021 reinsurance renewals saw the limited cyber reinsurance treaty market look to ensure profitability and reduced systemic issues affecting their books,” it added.
Ransomware continued as the key cause of losses for the third year running. The average demand in the fourth quarter of 2020 was $42 million, up from $12.8m a year before, Gallagher reports, with negotiated payments ranging from 10%-65% of demanded amounts. The highest demand in the first half of 2021 was more than $65m. The biggest costs, however, are the subsequent mitigation and business impacts. Downtime costs are five to ten times ransomware payments.
Another key area for losses is litigation, the broker warns, with privacy and security legal developments enabling “a far greater right of action for the individual”. Average damages for UK individuals for breach of personal information were £2,500 it found, not including legal fees. For breaches of healthcare information, the figure rose to £8,000.
In response to two years of unprofitable cyber books markets have replicated trends in the directors’ & officers’ market, according to Gallagher: increasing minimum security standards, applying rate increases, and applying sublimits for ransomware.
Nevertheless, the report states that insurers have hit their premium caps far earlier than expected.
“We expect most syndicates and global cyber insurers to be effectively closed for new business come September/October, reducing competition for renewing accounts in Q3 and Q4,” it concludes.
