GB Cyber Insurance Update – Q3 2023

Executive summary

This update is a general overview of the key developments in the GB cyber insurance market; we will analyse the current conditions for WTW clients both international and UK based companies using the London insurance market to transfer risk.

During Q3 2023 the GB cyber insurance market further established itself as buyer’s market, with significant levels of competition between insurers.

In particular:

All of these key developments will be covered within this update.

Cyber insurance market capacity

Q3 2023 has seen very strong competition from insurers to deploy capacity on both primary and excess layers, where in contrast to the recent past, insurers generally wish to deploy capacity on a primary and/or low excess basis, where premium levels are most attractive.

Market conditions have provided existing cyber insurance buyers with a range of options to purchase increased policy limits, and where renewal savings have been generated, clients continue to repurpose these savings to purchase additional capacity and/or WTW’s Restore (reinstatement) function via our CyXS excess facility.

USD10m remains a common average amount of capacity offered per insurer, with some insurers now offering limits/capacity in excess of USD10m.

WTW’s 2023 launched excess layer facility “CyXS”, offering up to USD/GBP/EUR 50m of excess capacity, has been utilised by a range of our clients in Q3 2023 as part of achieving the aforementioned optimum results, with a number also purchasing the CyXS Restore function, which provides the option to purchase a reinstatement of limit at pre-set pricing, giving further options for clients to consider as programmes are being restructured with increasing regularity.

Premiums and self-insured retentions

Premium reductions of around 15-40% were often available during Q3 2023, however this is not the default position and was influenced by a number of factors, such as the existing premium level, and total limit purchased, as these can impact the level of opportunity for restructuring placements.

There were exceptions to the trends outlined above, but these were generally confined to placements where risk controls were perceived as insufficient, there had been claims activity, or where the current pricing was considered to be low or inadequate.

In terms of self-insured retentions, insurers have generally been willing to provide alternative lower options/structures, particularly where they are competing to secure new business. For clients with lower retentions, there is often little premium relief available to materially increase their self-insured retention, due to pricing reductions being available on an ‘as is’ basis.

Buyers who see pricing as a key consideration will need to navigate the market with a well thought out strategy (hand-in-hand with their broker) to ensure the best results are achieved, including factoring-in any other key priorities, such as cover enhancements, self-insured retention structures, local policies and the like, as these may well impact the overall strategy.

Policy coverage

The hot topic during all of 2023 has been the war exclusion and this has remained red hot in Q3 2023. Lloyd’s of London (“Lloyd’s”) market bulletin of 16 August 2022 came into effect on 31^st March 2023^[1], and more recently Lloyd’s has told it's syndicates that they must attest by 31^st October 2023 regarding the war exclusions they are writing business on.

In recent weeks Lloyd’s has made it clear to its syndicates that in 2024 there will be a strong link between each syndicates level of maturity in respect of non-natural catastrophe exposure management and their ability to offer certain categories (set-out by Lloyd’s) of war exclusion.

WTW’s Global Head of Cyber Coverage Andrew Hill has authored the report ‘War exclusions in cyber policies; the important details’, that addresses the controversy, misconceptions, ‘Traditional’ war exclusions vs Lloyd’s model war clauses and more, including the WTW war exclusion.

“

War exclusions in cyber policies; the important details”

Andrew Hill | WTW’s Global Head of Cyber Coverage

WTW prides itself in delivering a clear and accurate broking advisory service and firmly believes that its approach of breaking down complexity puts the client at the centre of the decision-making process, giving client’s confidence that the solution being purchased delivers value.

Given the lack of consensus amongst insurers regarding war exclusions they will or will not support, the impending direction from Lloyd’s regarding exposure management maturity and a number of cyber insurers renewing their own reinsurance arrangements on 1^st January 2024, it is important to factor such variables into your renewal/purchasing strategy with your WTW cyber broker at the start of the process.

Claims and notifications

We have observed the following trends during Q3 2023:

• Several high profile incidents occurred in Q3, such as:
  • MGM Resorts cyberattack (filings suggest losses of in excess of USD100m)^[2]
  • Caesars Entertainment – reported ransomware demand of USD30m alone^[3]
  • National Air Traffic Control (NATs) flight data issue – causing widespread flight disruption that left thousands of passengers stranded^[4]

Based on the above trends and the favourable cyber insurance market conditions, that now seems a very compelling time to purchase additional capacity, or for those who do not currently purchase cyber insurance cover now would appeal a tactically appealing time to do so.

References

1. Lloyd’s Bulletin State backed cyber-attack exclusions Return to article undo
2. abc News Data breach at MGM Resorts expected to cost casino giant $100 million Return to article undo
3. CNBC Caesars paid millions in ransom to cybercrime group prior to MGM hack Return to article undo
4. BBC Cancelled flights: Air traffic disruption caused by flight data issue Return to article undo