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Cyber-attacks surge, premiums up – brace for insurance cost hike

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TLDR:

An increase in cyber-insurance claims in 2023, driven by a more active threat landscape, will likely mean that last year’s price plateau in cyber-insurance premium costs will be short-lived, according to industry experts. While premium costs fell by 6% in the third quarter of 2023 compared with the same quarter in 2022, ransomware- and privacy-related claims had already skyrocketed from the previous year, according to risk management consultancy Marsh. The cost of cyber-insurance premiums typically lags changes in the threat landscape. In 2020 and 2021, for example, ransomware and other disruptive attacks surged, leading to significant costs for the insurance industry. On average, the industry saw its direct loss plus defense-and-cost containment (DCC) ratio — a measure of the costs of a portfolio of policies compared to its revenue — surge to 73% in 2020 and 68% in 2021, before dropping last year to 43%, according to data from FitchRatings.

When attacks surged, soon so did premium fees, more than doubling year-over-year by the fourth quarter of 2021, according to data from Marsh. Throughout 2022 and 2023, however, rate increases slowed and actually declined in second and third quarters of 2023, according to the latest quarterly Global Insurance Market Index report. In many ways, the chaotic cyber-insurance market originated with the coronavirus pandemic. Following an increase in cyberattacks during the pandemic, cyber-insurance claims surged, leading to a dramatic increase in pricing.

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