Want a startling statistic? Well, according to Marsh, and as we report this week, the number of cyber claims in the UK more than doubled between 2019 and 2000. And I’m fairly certain that the high level of claims will continue when the figures are finally tallied for 2021.
Unsurprisingly, ransomware claims have been a significant component of the cyber threat to business, and, as Marsh points out such attacks “continued to wreak havoc on organisations in Q1 2021”, with bad actors now targeting both Software-as-a-Service (SaaS) and insurance companies.
For carriers, this is a worrying trend indeed. At a macro level, cyber is increasingly being viewed as a systemic risk: the threat of risk spreading into a business from connected third-parties or out of a single business into others, and effectively spreading at an alarming rate throughout the wider system. It’s also the threat of one part of a digital business system going down, which then cascades and has a much larger negative impact on the extended system.
Still, one supposes that at the more granular level such grandiose issues are of very little concern. After all, what matter to the policyholder is the extent to which they are covered in the event of a cyber incident, and the price they have to pay for that cover.
Well, a spike in claims, couple with a reduction in cyber capacity – at least in the London market – has meant quite a sharp increase in pricing. As Marsh says, starting in the first quarter of 2021, nearly all of its clients that bought insurance through the London Market experienced an increase in cyber insurance pricing. And the pricing pain is far from over, it adds: “An early look at Q3 2021 data shows that every renewal is seeing an increase in premium.”
In some senses this sort of knee-jerk increase in premium is the sort of thing that drives buyers mad. Why should they be punished for a risk the market clearly doesn’t know how to quantify?
Well, ok, one can see their point. But I’d like to be a little bit more charitable and suggest this is a market still finding its feet- or rather its price point. Understandable in the current environment, but buyers will not be so charitable in future.
Enjoy the read,
Editor, Emerging Risks