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Cyber loss ratio improves to 32.4% for US carriers: Aon

The loss ratio for the US cyber industry improved to 32.4 percent across standalone and package policies in 2017, Aon said in a report based on US statutory filings.

That compares with 45.9 percent in 2016, after excluding 1.7 percentage points for adjusting costs, the report, released yesterday, shows.

“Our study reveals that despite several significant and prolific cyber attacks in 2017, industry premium continued to increase and loss ratios continued to decrease,” said Jon Laux, head of cyber analytics at Aon’s reinsurance solutions business.

“It also demonstrates that underwriters are structuring and pricing policies in a way that allows them to generate profit,” Laux added.

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Cyber carriers in the surging US market had an average combined ratio of 61.4 percent last year, a 15.2 point improvement over 2016, as shrinking loss ratios also reflected a reduction in claim severity, Aon said.

The changing dynamics of the business as well as rapid growth in packaged policies that include cyber coverage helped bring more carriers into the segment, with 170 US carriers participating last year, representing a 21 percent increase.

The decline in severity from 2016 was illustrated by the 38 percent drop in the size of the average cyber claim last year, Aon said, falling to $56,688 from $90,865 in 2016.

Aon compiled its data from reports collected on a calendar year basis by the National Association of Insurance Commissioners (NAIC), which also contributed to improvement in loss ratios. Reserve releases had an impact on the reported ratios, Aon said.

Aon also noted that the cyber marketplace is increasingly made up of small commercial insureds that purchase smaller limits, have less costly attacks and are targeted less on a per-company basis by cyber criminals.

Hackers are also increasingly using ransomware against individuals and smaller businesses, which are less likely to have cyber insurance than large companies, Aon said.

The rise of ransomware can also help explain the observed increase in claims frequency but decrease in severity, Aon noted.

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Premiums collected surged 37 percent to $1.84bn, a figure that excludes business written by MGAs and non-US insurers as well as premiums written by US carriers on business outside the country. Aon identified Chubb as the market leader.

The report also indicates that new entrants to the US cyber market are sharing in the growth of direct written premiums.

Last year, the top 10 cyber insurers accounted for 69 percent of direct written premiums, down from 73 percent in 2016.

Most of the premium growth came from package policies last year, Aon said, noting that package cyber premiums almost doubled from 2016. But the study noted difficulties in verifying some of the data, as about 14 percent of cyber premiums included in packages derived from carrier estimates.

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