General Insurance Article - Moody's: Increasing demand prompts growth of cyber insurance

 Currently, more than 50 insurers globally offer stand-alone cyber coverage, in addition to other carriers that provide cyber-related endorsements to commercial general liability or multi-peril policies. Along with these policies, a number of insurers are offering valuable loss avoidance and risk mitigation services. In the US, where the largest share of standalone cyber insurance policies are in effect, the segment still remains a niche market within the commercial P&C sector, generating a few billion dollars of premiums annually.

 "The cyber insurance market has grown rapidly in the past two years in response to sharply heightened risk awareness, following widely publicized attacks on corporations, financial institutions and government agencies," "Though cyber insurance remains a niche within the global P&C insurance market, we believe it has significant further growth potential."

 Cyber insurance has seen strong growth, at 25% to 35% in each of the past few years, with typical policy limits ranging from $5 million to $25 million per carrier, with much larger coverage towers available on a syndicated basis. Moody's views significant expansion by insurers into the cyber risk insurance market as credit negative, similar to expansion into other high risk/return product segments such as terrorism and fidelity/crime, as underwriters test the risk/return spectrum of the product. However, despite the strong further growth potential for cyber insurance, insurers have generally approached the market cautiously, often with the support of reinsurers. Additionally, there are significant challenges to sustained rapid expansion of the market, according to Moody's report.

 "One of the challenges in underwriting cyber risk is the complexity of estimating clients' exposures and vulnerability," said Murray. "The primary constraints include lack of standardized, credible data on frequency and severity loss and the fact that the same loss could affect multiple insured clients."

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