Global credit ratings agency, AM Best has published its most recent Best’s Market Segment Report, entitled US Cyber: First Hard Market Cycle Brings a Return to Profitability. In it, they say direct written premiums for cyber insurance in the United States increased 50 per cent to $7.2 billion, a figure they say is triple what it was three years ago, thanks to surging demand.

Rate increases, tighter underwriting, improved risk selection and a decrease in ransomware attacks are all cited as reasons for the improvement in the business line. “Compared with 2021, the loss ratio fell 23 percentage points to 43 per cent on standalone policies, and 18 percentage points to 48 per cent on packaged policies,” they write.

They add that the cyber universe is expanding and becoming more complex, with artificial intelligence creating new exposures and ransomware returning to prominence. “The demand for cyber coverage will only increase,” says senior industry analyst, industry research and analytics with AM Best, Christopher Graham.

The report further states that there is a continued shift away from packaged policies in the U.S. – more than 70 per cent off cyber premium was written on standalone policies. In 2022, total standalone direct premiums written exceeded all of the cyber premiums written in 2021. “AM Best views this trend as welcome news for the industry, as it may reduce disputes and litigation costs.” 

Systemic risk remains an ongoing concern as catastrophes are generally limited to a geographic area, which is generally not the case in the event of a cyber catastrophe. Similarly, they discuss war-related clauses, saying “as the definition of war becomes broader, so may the exclusion as well, which could lead to insureds with less coverage,” they write. “Ultimately the coverage provided to insureds may be decided by the risk appetite of the insurer, and to a certain extent, the coverage that reinsurers are willing to provide.”