Decrease in cyber insurance premiums as per recent findings
In a recent report by credit rating agency AM Best, it was revealed that cybersecurity insurance premiums declined by 2.3% year over year, reaching approximately $7.1 billion in 2024. This marks the first such decline since the National Association of Insurance Commissioners began collecting data in 2015.
The decline in premiums was primarily driven by pricing changes, rather than changes in risk exposure. The report does not indicate any significant changes in the overall risk exposure for cyber insurance providers. However, it does highlight third-party risk as a serious emerging challenge in the cyber-insurance marketplace.
Part of a good cyber hygiene strategy should include due diligence on third-party vendors and anticipation of such scenarios. Companies with complex webs of third-party vendors face diverse and difficult-to-manage cyber risks. These companies may find it difficult to collect insurance payouts from losses related to vendor breaches due to fear of damaging relationships with vendors.
The report offers several possible explanations for the slight decline in cybersecurity insurance premiums. One of the contributing factors is the decrease in cyber insurance prices in the latter half of 2024. This decrease was reported by AM Best as a factor in the overall decline in premiums.
The cyber insurance market remains profitable, as the loss ratio of cyber insurance providers (the proportion of premiums used to pay out claims) remained below 50%. This indicates that the industry is managing claims effectively and efficiently.
In terms of market leadership, the top five cyber insurers by annual premiums remained unchanged in 2024. The Hartford, Erie, and Berkshire Hathaway held the most policies, while Chubb maintained its top ranking, Fairfax Financial held onto third place, and Travelers Group jumped from fourth to second.
Organizations with strong cyber hygiene and good loss experience may find it more beneficial to pay their own captive insurance, keeping the benefit of their own good experience. This trend could potentially contribute to the data showing declining premiums, as some large businesses may be using self-insurance arrangements to manage their cyber-risk exposure.
Munich Re, a leading player in cyber insurance expansion, had cyber insurance premiums of €1.6 billion by the end of 2024, up from €500 million five years earlier. However, a full ranked list of the top five insurers by premium was not available in the sources.
In conclusion, while the cyber insurance market has shown a slight decline in premiums, the demand for cyber insurance remains steady. The industry continues to evolve, with third-party risk emerging as a significant challenge. It is crucial for organizations to maintain vigilance in their cyber hygiene practices and to work closely with their insurance providers to manage these risks effectively.
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