Cyber insurance is a relatively new form of insurance coverage that protects businesses from internet-based risks and cyber threats. As cyber attacks and data breaches have increased in frequency and severity in recent years, the demand for cyber insurance has grown exponentially. However, the cyber insurance market remains complex and difficult to quantify. This article will examine the key statistics and trends in the cyber insurance industry to understand the scope, scale, and growth of cyber insurers.
The rising need for cyber insurance
Cyber threats pose serious financial, operational, and reputational risks to businesses of all sizes and across all industries. According to a 2021 global survey by Deloitte, 97% of technology, media, and telecommunications companies reported experiencing a cyber incident over the past year. The average cost of a data breach is now $4.24 million. The impacts of cyber attacks extend far beyond immediate financial losses, asrevenue loss, business disruption, recovery costs, and reputational damage can linger for years. As a result, demand for cyber insurance has surged, with premiums estimated to exceed $20 billion globally by 2025.
Key cyber insurance market stats and facts
- There are over 200 cyber insurance carriers worldwide as of 2022, including longstanding insurers like AIG and Chubb as well as new entrants and startups.
- The global cyber insurance market was estimated at $7.1 billion in premium volume in 2020.
- The US accounts for an estimated 90% of the global cyber insurance market currently.
- Up to 30% annual growth is projected for the cyber insurance market over the next few years.
- 60% of mid-size US companies now have cyber insurance, up from 35% in 2016.
- Cyber insurance take-up rates among large US corporations exceed 80%.
While exact figures vary, most estimates indicate there are between 200 and 300 cyber insurance carriers active globally today. The cyber insurance market remains concentrated in the United States and a handful of other advanced economies but is expanding worldwide. Double-digit annual growth is expected to continue as awareness, threats, and regulation drive demand.
Types of cyber insurers
The cyber insurance market today consists of a diverse mix of incumbent insurers and new entrants:
- Traditional property/casualty insurers – Longstanding insurers like AIG, Chubb, and Allianz who have added cyber products.
- Monoline cyber insurers – Carriers like Coalition, At-Bay, and Kovrr focused specifically on cyber risks.
- Insurtechs – New insurance startups like Corvus Insurance entering cyber as a primary line.
- Brokers – Insurance brokers like Marsh and Aon who offer cyber coverage from various insurers.
- Self-insured entities – Large corporations who elect to retain some or all cyber risks.
The entrance of new startups and increasing competition has driven innovation in the cyber insurance market. More carriers are now offering compromised system response services, risk mitigation advice, and other value-adds beyond just financial protection.
Key cyber insurance carriers and players
While there are hundreds of cyber insurers globally, several major carriers stand out in terms of market share and prominence in the US cyber insurance market today:
- AIG – The market leader with an estimated 20% share of US cyber premiums.
- Chubb – Another leading incumbent thought to be #2 in cyber market share.
- Allianz – A top 5 cyber insurer focused on small/mid-size firms.
- XL Catlin – Major player providing tailored coverage up to $400 million.
- CNA – Top 10 cyber insurer with dedicated cyber risk engineering services.
- The Hartford – Longstanding firm with cyber policies for mid-market clients.
- Coalition – Leading monoline startup insurer founded in 2017.
- Corvus – Innovative insurtech offering Smart Cyber Insurance policies.
In addition to carriers, brokers like Marsh, Aon, Willis Towers Watson, and Arthur J. Gallagher play an integral role in the cyber insurance ecosystem by providing access to policies from multiple insurers. Large reinsurance firms such as Swiss Re and Munich Re are also active in absorbing some of the risk cyber insurers take on.
Cyber insurance client sectors
Cyber insurance policies are purchased by a diverse range of organizations across virtually every industry sector today. However, some of the most active client segments include:
- Financial services
- Healthcare
- Retail and e-commerce
- Technology
- Manufacturing
- Education
- Government contractors
These industries handle sensitive data, provide critical services/infrastructure, and are prime targets for cyber criminals – making cyber insurance a priority. However, even sectors historically less associated with cyber threats are purchasing coverage, evidencing the universal need for cyber insurance today.
Global cyber insurance growth trends
After early struggles, the global cyber insurance market has achieved strong expansion over the past decade. Several key trends are expected to continue driving double-digit premium growth worldwide:
- Exponential increase in frequency/severity of cyber attacks and data breaches.
- Rising data protection and security regulations requiring insurance in many jurisdictions.
- Increasing digital transformation and cloud migration expanding the threat landscape.
- New risks like ransomware, IoT vulnerabilities, and systemic threats.
- Mainstream awareness and adoption of cyber insurance as a result.
Europe in particular is poised for major cyber insurance growth, spurred by regulations like the EU GDPR. Asia-Pacific markets are also heating up as local insurers and global players target the region. Overall, cyber insurance is transitioning from a niche to a standard business policy across much of the world.
Cyber insurance premium trends
In addition to fast-rising sales, cyber insurance premiums have increased rapidly along with expanding coverage and rising claim costs. Some key trends include:
- Average policy premiums rising from $900 per year in 2012 to around $3,700 per year currently.
- Average claim costs have doubled from around $200,000 to over $400,000.
- Policy limits are increasing, with maximum coverage often $5-$15 million or higher.
- Deductibles are also increasing, typically starting from $10,000-$25,000 or more.
- Coverage extensions for contingent business interruption, reputational harm, and cyber extortion.
While driving costs higher, insurers believe expanded cyber insurance coverage and limits are essential to match the scale of current cyber risk exposure. Sustained pricing increases are expected until the market stabilizes.
Challenges facing cyber insurers
Despite strong growth, cyber insurers face a range of challenges including:
- Pricing adequate premiums given the evolving threat landscape and exposure.
- Effectively evaluating and pricing cumulative or systemic aggregation risk across clients.
- Limiting adverse selection from the most high-risk organizations.
- Developing an actuarial basis from limited historical data.
- Preventing coverage for uninsurable or excluded cyber warfare, nation-state attacks.
- Capping potential losses from catastrophic cyber events affecting multiple clients.
To address these issues, insurers are tightening underwriting, hiking premiums, requiring risk mitigation controls, and reducing policy limits in some cases. Better data and risk models will help enable a healthier cyber insurance market over time.
The future of cyber insurance
Cyber insurance is likely to remain a highly dynamic, rapidly evolving specialty insurance line for years to come. Potential future developments include:
- Mandatory cyber insurance for companies in regulated sectors like healthcare and finance.
- New hybrid public-private risk transfer schemes and backstops to cover catastrophic cyber events.
- Further innovation in products from expanded coverage to true risk-based pricing.
- Increased competition from new insurtech entrants and alternative capital solutions.
- Greater intermediary involvement in risk mitigation and cyber security standards.
- Improved loss data quality and modeling, rate adequacy, and underwriting discipline.
While challenges remain, cyber insurance is quickly becoming an essential component of risk management for all sizes and types of organizations worldwide.
Conclusion
In summary, the cyber insurance industry has experienced massive growth over the past decade, with over 200 carriers now active globally and premiums projected to exceed $20 billion by 2025. The US accounts for the majority of the current market, but major expansion is expected worldwide driven by surging cyber threats and regulations mandating coverage. Key insurers like AIG and Chubb lead the market currently, but new competitors are proliferating. Virtually every industry sector is purchasing policies today given the universality of cyber risk. However, significant challenges remain for cyber insurers related to risk aggregation, pricing, modeling, and capping catastrophic losses. Continued evolution is necessary for cyber insurance to reliably play its vital role in mitigating the financial impacts of cyber attacks.