Cyber Alert
Cyber Market Update Heading into Q4 2022 - Alliant Insurance Services - October 26, 2022
The first half of 2022 saw a continuation of the extreme increase in overall rate within the cyber liability insurance market. As we begin the fourth quarter of 2022, renewals are starting to normalize, somewhat, for the buying public. Although markets are still deploying less capital on any one risk than they may have two or three years ago, their willingness to engage on a wider range of opportunities than in the past eighteen months is apparent. Some takeaways:
- Increases to premium/rate have simmered down, averaging between 15% and 40%, compared to many classes seeing increases north of 50% six months ago. Underwriting and pricing is still heavily dependent on network security fundamentals.
- Insureds renewing now and in the fourth quarter have already received high double-digit and—in some cases—triple digit increases during their 2021 renewals so underwriters are taking more moderate approaches to rate changes.
- Smaller companies with less robust network security postures that are seeking new coverage or renewals are seeing coinsurance and other restrictive covenants from underwriters as a way to offer cyber liability insurance.
- This segment is also more likely to see retentions raised, again, as carriers look to further insulate themselves from the current volatile claim environment
- Excess rate-on-line (i.e. pricing of excess relative to the underlying layer’s pricing) is sliding back down, closer to 80%.
- Competition for layers has picked up as carriers and recently established MGAs are looking to hit annual premium budgets
- Carriers remain reluctant to issue broad, all-inclusive terms for Managed Service Providers (MSPs) and other cloud-based enterprises.
- The true breadth and scope of any one loss for a MSP is hard to quantify through underwriting; carriers looking to treat such situations like property markets treat losses from named storms.
- Many carriers are deploying (or planning to deploy) “systemic loss” language.
- Select U.S. markets have begun inserting ‘widespread event’ or ‘catastrophic first party loss’ exclusions on their renewals
- Capacity is otherwise holding steady if cyber security controls are strong
- If controls are below par, obtaining renewal terms remains incredibly challenging
- As the war in Ukraine continues, London underwriters are all deploying proprietary war exclusion language.
- Contingent Business Interruption and system failure coverage is being sub-limited for many buyers.
- Cyber is still “easier” to place than standalone Technology/Software E&O and/or if it is blended with cyber liability
- Failure of technology/software is seen more as a binary risk with higher cost implications on a widespread basis.
- Insureds already utilizing captive insurance companies are increasingly putting cyber liability (or retentions for cyber liability) through said captives
- Submission-to-quote timeline remains longer than in past years. Additional signoffs as well as tighter guidelines remain in place for all major players in the space.
- High-quality submissions are receiving $10 million support on any one layer again from many insurers
Articles
Cyber Hard Market is 'Here to Stay,' Says Best - June 21, 2022
Cyber Prices 'Need To Come Up and Stay Up': Advisen Panel Reports - May 19, 2022
Negotiating in a Ransomware Attack: What Really Happens? - March 25, 2022
Cyber Raised 'Alarm Bells' for Brokers in Q4: CIAB - March 9, 2022
US Cyber Pricing Skyrockets an Average 130% in Q4: Marsh - February 3, 2022
Reports
Cyber Liability Market Update - January and February 2022
Alliant CIAB State of the Market 2021 Q4 - Q4 2021
Q4 CIAB Property Casualty Market Report 2021 - Q4 2021