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The U.S. cyber insurance market saw what Fitch Ratings called an unexpected 1% decline in direct written premiums in 2023 following a 160% increase from 2020 to 2022.

According to Fitch Ratings’ standalone cyber written premium declined by 3% while package coverage increased 5% in 2023.

Managing Director Jim Auden said, “Market concentration has become diluted as more insurers enter the cyber market attracted by longer-term growth opportunities.”

The top 10 writers of cyber insurance in 2023 accounted for 50% market share whereas the top 10 held a 69% as recently as 2019 as a result of recent substantial price increases for coverage as well as changes in underwriting practices鈥攕pecifically more restrictive requirements for cyber hygiene and risk management.

Fitch Ratings said cyber has been one of the most profitable commercial business lines from 2019 to 2023, with an average direct loss and DCC (defense and cost containment) ratio of 55%.The average cost of the claims payment has been fairly steady over the last couple of years, with 6,200 standalone cyber claims closed in 2023 at an average payment of $186,000. The average payment on package cyber claims dropped to $148,000.

These factors have attracted more competition and underwriting capacity, leading to a reversal in pricing trends. Recent commentary from broker Marsh reported cyber renewal prices were down 6% during first quarter 2024.

“Underwriters risk management practices continue to improve, but large incidences of data breaches, business e-mail compromises and ransomware attacks continue to present a long-term threat,” said Senior Director Gerry Glombicki. “Cyber loss risk is also affected by expansion in regulatory and compliance requirements that increase potential for litigation risks and substantial fines and penalties for not properly disclosing data breaches.”

Nevertheless, the global cyber market鈥攚hich currently represents less than 2% of all industry commercial lines鈥攊s expected to grow gross written premiums by more than double to $29 billion, according to Munich Re.

Topics Trends USA Cyber Pricing Trends