Number of US Cyber Insurers, Premiums, and Loss Ratio Grew in 2020

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June 25, 2021 |

Cyber insurance with woman in white shirt and various digital icons

The number of US cyber insurers and cyber-insurance premiums continued to grow in 2020, according to a report from Aon.

According to Aon's US Cyber Market Update, 200 US insurers reported direct cyber-written-premium to the National Association of Insurance Commissioners (NAIC) in 2020, up from 192 in 2019. New market participants averaged $1.17 million in cyber premium each, a considerable increase from previous years, the report said.

US cyber-insurance premiums grew to $2.74 billion in 2020, a 21 percent increase from the prior year, Aon said. Similar rates of growth were seen for both package and stand-alone cyber-insurance products.

Insurers' loss ratios increased for both stand-alone and package cyber coverage in 2020 as well, driven by severity, the report said. The direct incurred industry loss ratio was 67.0 percent across all policies, Aon said, with stand-alone policies reporting a 72.8 percent loss ratio and package business seeing a 58.6 percent loss ratio.

Both the stand-alone and package sectors saw their highest cyber-insurance loss ratios since the NAIC began collecting the data in 2015. The loss ratio on stand-alone cyber policies increased 25.7 percentage points in 2020, on top of a notable increase in 2019, Aon said. The increase for package policies was 16.4 percentage points, and the total industry loss ratio increased 22.0 percentage points.

The 2020 loss ratio increase appears to be primarily due to an increase in claim severity, according to the Aon report, with the average claim size increasing more than 50 percent from $48,709 in 2019 to $74,354 in 2020. "We observed this trend among our clients in 2020, with ransomware claims seeing heightened incident response costs as well as extortion demands," the report said.

Meanwhile, claim frequency appeared to be flat, according to NAIC data, Aon said.

US cyber insurers saw a modest rate increase in 2020, averaging 2.5 percent greater than 2019, according to the report. "We expect to see significantly more rate come through in next year's numbers based on insurers' actions late in 2020 and the first half of 2021," the report said.

June 25, 2021