Cyber insurance expected to be growth area: A.M. Best

A report by A.M. Best has found cyber insurance to be one of the leading growth areas in the property and casualty market.

The report estimates cyber coverage will rise from $7.5 billion to $20 billion by 2020, but said it is too early to determine if the growth projections will come to fruition.

The biggest shift in the way cyber policy is written has been a move from packaged policies to standalone, a change which is considered positive by the ratings agency.

Cyber insurance has been profitable for the majority of companies, with the direct loss ratio decreasing from 51.4% in 2015 to 21.8% in 2016.

In 2016, direct premiums written (DPW) were $1.3 billion, with 67.9% on a standalone basis.

The top 20 cyber insurance writers wrote $1.2 billion in DPW, with 73.7% on a standalone basis.

Of the $699 million DPW from the top five cyber policy writers, 81% were standalone policies. The DPW from standalone and packaged policies increased by 34% between 2015 to 2016.

According to the report, this move to standalone cyber policies “may contribute to better pricing and reserving methods, which may ultimately lead to refinements in modeling tools and contribute to more accurate understanding of risk aggregation”.