Analyst firm Fitch Ratings said that the new rule being implemented by the New York Department of Financial Services has the potential to spur growth, but also result in losses for the insurance industry.
The rules, which will take effect on March 1, will affect 3,000 institutions. It will make New York the first US state to adopt cybersecurity regulations, Fitch said.
In a statement, the analyst firm said that it could propel growth in the cyber security insurance and directors and officers (D&O) business lines, but it could also raise potential losses for insurers.
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“Cyber insurance underwriting, separate from D&O, has been growing significantly over the past several years,” Fitch noted, adding that property/casualty insurers wrote “approximately $1 billion in direct written cybersecurity premiums” in 2015. Further, the firm said that the new regulatory climate could reinforce the growth trend in this space.
However, “the new rules could raise compliance risks for financial institutions and in turn, premiums and loss potential for D&O insurance underwriters.” According to Fitch, this is due to a rule requiring a director or senior officer to annually certify regulatory compliance.
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