The state of the cyber insurance market couldn’t be stronger, according to industry heads. Customers are flooding the market but so, too, is competition.
Mike Palotay, chief underwriting officer at NAS, said the market seems to be expanding at near light speed.
“I’ve been doing this for 10 years and it’s always been growing fast on a year-on-year basis and it’s really showing no signs of slowing down. The small and middle market space seems to be growing like I’ve never seen it grow before,” Palotay said.
NAS is more heavily-weighted with small-mid market accounts, he said, with some larger accounts.
“I think with things in the news and the understanding that anyone can really suffer a significant loss – whether it be from a data breach, or from phishing, or from some kind of fraud attack, wire transfer fraud, crypto-locker viruses, a lot of these things that aren’t only targeted towards really large, multi-national companies – I think the awareness of that has really percolated more than I’ve ever seen it before,” he explained.
“And with that understanding comes just a lot better penetration. I’d say that 80% of the accounts that we write as new business are new first-time buyers. So a lot of new buyers are still coming into the marketplace, which is fantastic. The losses are ticking up [too], we’re seeing increased frequency – so it’s not all good news – but we definitely think it’s a good area for us to continue focussing on.”
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NAS is writing about 50-100 new small business accounts a month, Palotay said, while covering about 900-1000 cyber breaches a year. But while the cyber insurance market is flush with new customers, it is also being flooded with insurance companies offering coverage, he said.
“They’re flooding in, it seems like, faster than the insureds are flooding into the market,” he said. “It’s one of the few areas in insurance that’s growing rapidly. So if you’re running an insurance company and you don’t have a cyber solution, there’s some, I think, career risk. But that doesn’t mean that all the policies and all the offerings are equal. They’re certainly not.”
There are still areas to grow, though. Palotay is currently “polishing the wording off” on a new policy to provide coverage for injuries sustained by hacked machinery, he said. There aren’t many providers offering this yet, he added, but it was likely to be a big area in future – as hospital and manufacturing IoT machines were increasingly patched into the internet, where they could potentially fall prey to malicious attacks.
“Right now, we’re going to be rolling out bodily injury coverage, so bodily injury as a result of a cyber breach,” he noted. “There’s a big concern for that, and that’s a big hole right now, because most insurance policies have exclusions for cyber-attacks. So we’re rolling out a solution for that in the next couple months that we think will be good.”
Erica Davis, senior vice president and head of specialty products E&O at
Zurich, agreed the cyber market remained strong, as it grows and strengthens.
“The security and privacy marketplace continues to evolve. I would say it was fairly volatile in 2014 and 2015, but in 2016 it began to stabilize with a new wave of buyers,” she said.
“As with any young product, it’s now begun to evolve to fit customer needs, and those customers include industries outside of those classes. Definitely I would say everybody, at this point, has a cyber exposure. The product is more mature now. We’ve got more exposures, the threats are changing. And as an industry, that allows us the opportunity to increase our role and help businesses become more resilient.”
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