The number of UK organisations purchasing cyber insurance in H1 2021 continued to increase, driven by board-level requests and the rise in the use of technology, according to Marsh.
At the same time, according to its UK cyber insurance trends H1 2021, pricing increased sharply, while insureds’ controls were reviewed in detail by insurers to shore up their risks within their portfolio books, off the back of projected 100% net loss ratios in 2019 and 2020.
The report is based on aggregated data from Marsh UK clients who buy insurance through the London market.
According to Marsh, by the end of the fourth quarter of 2020, the cyber market had felt the full effects of COVID-19, following a transitioning of work to include more utilisation of technology. Similar trends continued in H1 2021 with continued lockdown forcing many to continue to work from home with some hybrid working models in place. Controls used to allow employees to work from home became a target, not only for bad actors, but also for insurers to review how organisations protect themselves against cyber-attacks.
At the same time, ransomware attacks continued to wreak havoc on organisations in Q1 2021. Bad actors were now targeting both Software-as-a-Service (SaaS) and insurance companies. While the SaaS attacks presented the possibility of systemic risk for insurers, the fact that they were being targeted themselves represented a shift in tactics on the part of bad actors.
All of these trends point to the need for resilience, the broker said, adding that organisations must take it upon themselves to ensure controls are in place:
“In many ways, underwriters are currently forcing their hand, calling for new minimum requirements for control, before any cyber insurance capacity is offered. Often, organisations will have established many, but not all of the top cybersecurity controls. As a result, they are often subject to requests for higher premiums, higher retentions, and in some rare cases, declinations. Organisations must take a proactive approach with their brokers to understand the insurability of their risk, as it stands today.”
Starting in the first quarter of 2021, nearly all of Marsh clients that bought insurance through the London Market experienced an increase in cyber insurance pricing. An early look at Q3 2021 data shows that every renewal is seeing an increase in premium.
Capacity deployment saw a sharp dip, as many insurers halved the amount of capacity they were deploying on programmes.
Starting in Q2 2021, there was a significant decrease in competition, according to Marsh, and major reductions in capacity, making more expensive excess layers competitive again. While excess pricing drove the 2020 pricing increases, the entire group saw increases, from primary to the top layers, in large programmes.
Retentions also started to see a sharp increase beginning in Q1 2021, with continuing momentum into Q2 2021. Early data suggests the likelihood of further increases in Q3 2021.