Cyber Insurance Is Quite Profitable at the Moment: PwC

Μost carriers say that cyber insurance is quite profitable for them at the moment, and a majority are also using reinsurance to manage their exposures, PwC found in a new global survey of specialist writers.

The consulting firm’s newest survey of the sector found 80 percent of respondents reported they’re writing cyber insurance business with combined ratios lower than 80 for the most recent 12-month period. PwC noted in its report on the responses that this highlights “the current profitability of these books.”

PwC added that most respondents’ actual combined ratio is either better than or in line with their initial target. What that means is that most respondents made their target premium level. Also, carriers seem to have a healthy appetite to grow their cyber books even though a few firms are below their growth target, PwC said.

If nothing lasts forever, however, it appears that the same thing holds true for the cyber insurance market’s current healthy state.

“New market entrants and competition are likely to erode it,” PwC said in its survey report. “The insurance industry has yet to experience a major and systemic cyber catastrophe event. Accordingly, we note that reserves and claims may develop adversely in time, and future profitability may be lower than insurers currently expect.”

As well, carriers are also worrying more about potential “silent cyber” claims and how these issues could affect current reserve levels, PwC said.

The other big PwC finding: More than 75 percent of insurers are using reinsurance to manage their cyber exposures.

PwC said that the respondents doing this showed a greater appetite for proportional reinsurance, “where reinsurers can rely on a cedants’ underwriting expertise to create an alignment of interest, rather than model results they do not trust.”

Furthermore, PwC said, “in some instances, cyber exposures will be covered on a nonproportional basis through property insurance, directors and officers, and E&O programs, where cyber acts as an ancillary exposure.”

In these situations, and as quantification capabilities mature, PwC said it expects more diversified capacity such as insurance-linked securities to come into the market.

PwC’s other survey/report findings:

• Most respondents said they had claims data from incidents such as data breach, ransomware, malware and phishing, with the average number of available data going back seven years.

• Companies are most worried about cyber-related business interruption/contingent business interruption because it has a potential systemic impact.

The full report is called: “Are insurers adequately balancing cyber risk and opportunity?”

Source: PwC