October 14, 2022

Portfolio Approach, Stronger Controls Stabilize Cyber Market

Cyber

3 min read

While the cyber market still has its challenges, there are currently greater signs of stability than at any point in the last 24 months. This positive trend has been driven by several key factors, including important lessons learned from what has become a mature, if not less volatile, marketplace.

Taking a Portfolio Approach

Carriers have begun viewing cyber insurance through a broader, portfolio-wide lens. To attain profitability, rate increases have been stabilized through underwriting discipline, risk selection, and strict management of limits and scope of coverage.

The result has been an improvement in loss ratios and profitability for insurers, which has increased carrier appetite for risk.

While this does not mean returning to the soft market of three or so years ago, it has led to a “happy medium” in which there is less friction to bring in new buyers and retain business for carriers. We are seeing more stability and a moderating rate environment compared to 2021 and 2022.

Stronger Controls Drive a Better Market

Another important factor in rate stabilization is a steady improvement in controls such as multi-factor authentication. After multiple renewal cycles, more insureds have implemented proper cyber protection measures.

Insurers now have more historical data, which they use to understand systemic risks and apply accurate models against a company’s cyber maturity. Rather than modeling for what a scenario could do in the way of financial loss, the strategy has matured to limiting exposures by strategically managing capacity in the case of a systemic cyber event.

Anticipating Future Trends

The current state of the cyber market can always be jolted by some new criminal attack. The next new malware or hack is always just around the corner, creating a relentless cycle of preparedness and reevaluation.

Fortunately, both insurers and insureds have cycled through this for several years. Specialty brokerages have developed a degree of sophistication that allows for comprehensive strategies, such as working with vendor partners to review, access and remediate network vulnerabilities to contain risk and improve portfolios.

There is no way to say for certain what future cyber disruptions could occur, and we are certainly not going back to the ultra-low price points of years past. However, in the near term, insureds can expect some more pricing consistency compared to their experience over the last two years.

Want to learn more?

Find Rob Rosenzweig on LinkedIn, here. Find Allen Blount on LinkedIn, here.

Connect with Risk Strategies Cyber Risk team at cyber@risk-strategies.com.

The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.

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