This update is a general overview of the key developments in the GB cyber insurance market, analysing the current conditions for both international and domestic companies using the London insurance market to transfer risk.
The GB cyber insurance market has seen significant changes during Q2 2022, with the segments within the market being more distinct and nuanced than previously experienced.
In particular:
The analysis is based on our own observations of the market and uses WTW proprietary data unless otherwise stated.
We are seeing an increasing number of insurers willing to increase their available capacity where the characteristics of the risk match their underwriting strategies.
To underline this, insurance capacity availability within the first USD/GBP/EUR50m layer has increased compared to Q1, particularly for the most attractive segments of the market (Previously less attractive/appreciated segments are also starting to see interest from insurers (focused on GBP1bn plus revenue accounts) who are increasingly showing interest in middle-market business where clients can tell a positive story and present the risk as high quality.
New insurance capacity has entered the wider market during Q2, with more likely to follow in Q3. For example, we are monitoring InsurTech insurers who have quickly established themselves in the US cyber market and may well have their eyes on competing in the middle-market space. In addition, a leading global cyber insurer has now launched an Environmental, Social & Governance (ESG) based syndicate, potentially augmenting the capacity they are already offering. Not all segments of the cyber market will benefit equally from this additional capacity.
Clients still need to show good level of risk control in order to secure capacity, however insurers are increasingly demonstrating flexibility where clients can provide the necessary context to explain their risk acceptance rationale. Insurers will have particular areas of focus and clients will need to demonstrate strong control measures in those areas. Unsurprisingly Insurers are keen to understand the business impact of events such ransomware attacks and extortion demands.
Insurers remain cautious where clients could be at risk from the Russia/Ukraine conflict, and this particularly applies to organisations in telecommunications, financial institutions and critical national infrastructure. It does seem that the level of concern is receding .
Premium increases in Q2 2022 are far more variable than in recent quarters, as the result of insurers focus on pricing adequacy. Clients with similar profiles may receive different levels of premium increases, the key being whether their insurer feels the expiring premium levels are sufficient.
In this respect, a small but increasing number of clients received a pricing reduction compared to 2021, often where a segment most impacted by 2021 capacity challenges then benefits from increasing competition in that segment. In the same period, some accounts are still receiving increases of 50% or more, usually where their premium levels are significantly lower than their peers, demonstrating an out-performance of 2021 market conditions.
Insurers remain focused on self-insured retentions, but we are pleased to say that for an increasing percentage of accounts renewing in Q2 2022 they are seen to be adequate. We should add that clients are also considering increasing the level of self-insured retention as they plan their cyber insurance purchasing strategies.
Insurers remain very focused on systemic risk. It is common in segments with more clients and so volume sales (such as the mid-market)that insurers offer less capacity per client than they would to large enterprises of £1bn or more, who are fewer in number and so present a lower accumulated risk.
Unsurprisingly the Ukraine/ Russia crisis has made Insurers nervous. Many insurers quickly reviewed their contract language relating to War and Terrorism exclusions and are mindful that Cyber-attacks have become a modern warfare tactic. During Q2, insurers approach to this language continued to fall into the following categories:
Insurers continue to utilise ransomware coinsurance and/or sub-limits where they are not satisfied that a client’s security meets the insurer(s) own minimum standards. Some insurers are not willing to consider offering cyber coverage unless certain standards are met. Insurers views on required minimum controls are increasingly varied and more flexibility. This gives clients, with the support of their broker, the opportunity to advocate for their approach.
Ransomware risk is a significant one and likely to result in significant financial losses beyond a ransomware demand itself. That said trends suggest that less ransomware demands are being paid.
Here are some highlight statistics regarding Ransomware from two vendors supporting businesses impacted by ransomware incidents.
Nearly 80% of cyberattacks leverage identity-based attacks to compromise legitimate credentials and use techniques like lateral movement to quickly evade detection – how can you give insurers comfort that your organisation sufficiently protects credentials, particularly privileged credentials? 2
Insurers are continuing to take a careful approach when considering new or existing risks. Clients are routinely asked to provide evidence of sufficient cyber security controls before a risk will even be given consideration.
Addition written submissions Insurers are increasingly required with a focus on Ransomware controls. Insurer presentation meetings are also commonplace.
Before submitting new or renewal risk proposals clients should:
1 Coveware May 3, 2022 Quarterly Report: https://www.coveware.com/blog/2022/5/3/
ransomwarethreat-actors-pivot-from-big-game-to-bigshame-hunting
2 Crowdstrike 2022 Global Threat Report: https://www.crowdstrike.com/global-threat-report/
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| Title | File Type | File Size |
|---|---|---|
| Q2 / H1 Cyber Insurance Market Update 2022 | .9 MB |
