Cyber BI remains most requested coverage according to PartnerRe/Advisen survey

Cyber-related business interruption remains (now for the third year running) the most-requested coverage for cyber-related policies, creeping up a further eight percentage points in 2020, according to PartnerRe’s annual Cyber Market survey ‘Cyber Insurance – the Market’s View’, in partnership with Advisen.

The global survey took place during the second quarter of 2020, with 260 cyber insurance brokers and 190 cyber underwriters from around the world sharing their observations and views on the latest trends and developments.

According to the survey, other frequent requested covers include cyber extortion/ransom, which surpasses last year’s number-two coverage, funds transfer fraud/social engineering, which has dropped to third place.

According to PartnerRe, the swap makes sense, given the fact that ransomware attacks increased in prevalence over the last year, causing both financial damage and business disruption for targeted organisations.

Silent cyber issues remain a chief cause of concern for underwriters, according to the survey, with 65% of underwriters saying that non-affirmative cyber cover on specialty property risks worries them. One underwriter said that silent cyber issues “can cause serious surprises in manuscript all risk policies that have been in the market for a long time”. Several commenters pointed to ongoing work on wordings in their companies and in the industry toward “eradicating silent cyber”.

Respondents expressed hope that the UK Prudential Regulation Authority and Lloyd’s of London affirmative cyber initiatives will soon ease coverage uncertainties.

“Traditional insurers are scaling back their otherwise covered causes of loss when a cyber event is part of a chain of causation (silent cyber exposure),” said one broker. “Insureds are increasingly looking to cyber insurers to solve these issues.”

The survey also addressed the important issue of whether cyber-related physical damage should be covered and, perhaps unsurprisingly, this remains an unsettled area between brokers and underwriters: most underwriters (61%) plumped for the traditional property policy, while most brokers (51%) chose dedicated cyber.

Despite the difference in answers, many comments reflect converging views – brokers agreed that it depends on the risk and the trigger, some calling it a “grey area”. Multiple respondents from both sides of the market said they feel that property and cyber underwriters should collaborate more to create a separate product or provide some coverage on both policies.

Underwriters cited the difference in underwriting practices between cyber and property, as well as the lack of capacity in the cyber market to provide the right limits for cyber-related physical damage.

As one respondent commented, “I can see the argument to place it under the cyber, but in order for it to become industry standard to be covered under cyber policies, cyber premiums/rates must increase”, while another added, “[physical damage] within cyber policies can be useful, but for sophisticated property risks such as energy plants, the cyber market doesn’t have nearly enough capacity to cover some of the significant sums insured … so property market needs to embrace this exposure.”

Other comments from underwriters spoke to the need to tailor coverage to insureds’ specific exposures and causes of loss.

Elsewhere, key findings from respondents included:

  • Coverage understanding has improved – 51% said this is a top–3 sales obstacle compared to 63% last year
  • 90% agreed that aggregation management impacts underwriting and pricing decisions – up from 73% last year
  • Rates have increased 5-10%, reported many brokers
  • Majority of brokers reported increased market consistency in pricing (61%) and coverage (72%)
  • 77% agreed that there is still no significant impact on pricing from GDPR
  • 60% agreed that insureds frequently request higher limits
  • 64% of brokers still limited number of carriers they work with for consistency
  • Use of outside vendors for aspects of aggregation management has risen from 29% to 40%
  • 65% of underwriters are concerned by non-affirmative cyber in specialty property
  • Board/senior management are driving more cyber sales – now in 3rd place compared to 5th last year
  • Cyber-related business interruption still most sought-after cyber coverage – 68% put this in their top 3.