For the fifth consecutive quarter, the price increase for cyber insurance continued to fall at the beginning of 2023.
According to a new report on US Cyber Purchasing Trends from broker Marsh, prices increased by 11% in the first quarter of 2023 compared to 28% in the last three months of 2022.
“The US cyber insurance market continues to stabilize,” said Meredith Schnur, US cyber brokerage leader, in a statement. “Barring unforeseen events, we expect to see a continued decline in the rate of increase through the remainder of 2023, especially for organizations with good cyber hygiene and loss histories.”
As 2022 progresses, buyers of cyber insurance begin to reverse the trend of maintaining more risk and begin to purchase higher limits as price increases for coverage moderate. In Q4 2022, 16% of clients purchased multiple limits, compared to 10% in Q2 2022, Marsh said. In 2023, the use of self-insured retentions continues to decline but clients continue to control cyber programs through captives. The number of Marsh-managed captive insurers writing cyber coverage increased 75% from 2020 to 2022.
During the tough cyber insurance market, captives have become “a very useful tool for organizations,” said Ellen Charnley, president of Marsh captive solutions.
“In some cases, organizations fund parts of their cyber risk to a captive single parent such as a deductible or a self-insured restraint. In other cases they use a captive for quota share arrangement or to access reinsurance,” he added.
The overall take-up rate for cyber insurance continued to increase in 2022, with 36% of Marsh clients obtaining coverage. Marsh says 60% of education clients have taken out cyber insurance – the highest of all industries, with healthcare at 56%.
“The increase in the number of organizations purchasing coverage is a positive trend, reinforcing the view that insurance is an important part of a holistic cyber risk management strategy. The Buyer uncertainty still remains however – namely around war, cyber operations, and systemic/catastrophic risk separations – which we continue to address on behalf of clients,” added Greg Eskins, product leader of cyber in the US. “Cyber insurance products should agree with the majority of those who invest in cyber insurance products to protect against strategic risks.”
The broker said it “continues to ask insurers on behalf of clients” about coverage for cyber war and catastrophic risk following new exclusions issued this year by Lloyd’s of London.
Related: Lloyd’s Cyber War Avoidances: Confusing, Disturbing, but Necessary?
Looking at claims trends, Marsh said the frequency of ransomware has returned after a brief slowdown last year compared to 2021. Ransomware-related claims increased 77% in first quarter compared to Q4 2022. Also, claims related to privacy increased by 85% in the last quarter of 2022.
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