RISK MANAGEMENT
3 LESSONS FROM CYBER LOSS RATIOS AND AVERAGES
Cyber insurance is now a significant line of business . How significant is it ? What do the numbers tell us ?
By : Paul Buse
The basic story is that cyber is hot , and top-line revenue averages 25 % over the past five years . As a niche market , cyber is now about half as large as the directors & officers ’ market . Perhaps it is not a surprise the growth rate is high , but the comparison to D & O is impressive after such a short time .
What is even more surprising , however , is the loss ratio . The loss ratio shown in the chart below is the incurred loss ratio , averaged over five years for all commercial cyber premiums with domestically domiciled insurers . This is the loss ratio that includes losses and defense costs paid and includes estimates of losses yet to be paid — aka loss reserves . As you can see , it averages 39 % of premiums .
From where does this information come ? The data is part of the annual filing required of USA-based insurers by their state regulators . The National Association of Insurance Commissioners adopted a Cybersecurity Insurance and Identity Theft Coverage Supplement for the 2015 propertycasualty annual financial statement . 2019 marked the fifth year of that data gathered , and we pulled that data for you .
What else does the cyber supplement tell us ? Here are three key findings :
01 . A relatively small number of insurers are involved in cyber . Three out of four insurers are sitting on the sidelines . Moreover , of those that write cyber , 80 % of
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Cyber Premium and Loss Ratio |
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Written Premium |
$ 2,500,000,000 $ 2,000,000,000
$ 1,500,000,000 $ 1,000,000,000
$ 500,000,000
$ -
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39 %
2015 2016 2017 2018 2019
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50 % 45 % 40 % 35 % 30 % 25 % 20 % 15 % 10 % 5 % 0 % |
Loss Ratio |
Cyber Written Premium Annual Loss Ratio 5-Year Average
7