We have all heard of the large data breaches and cyber attacks that have happened in 2021. These large-scale cyber attacks highlight the increasing threats these events have on businesses, governments, school systems, and infrastructure. These cyber events shocked the world and have resulted in billions of dollars in damages for all involved. As cyber threats grow, so do the number of businesses turning to cyber insurance for protection from cyber-related damages.
Celent’s new research, Cyber Opportunities: The Insurer Strikes Back, discusses the new opportunities cyber threats generate for insurers from offering cyber insurance to helping to create an ecosystem of technologies and services that protect companies from cyber risk.
Cyber insurance protects businesses and other entities against first party (policyholder) and third party (policyholder’s clients or customers) losses from an event that jeopardizes the confidentiality, integrity, and availability of an information system. The insurance can be provided through a stand-alone policy that provides only cyber insurance coverage or as a part of a package policy that provides multiple types of coverage, such as a general commercial liability insurance policy.
Globally, the cyber insurance market is growing quickly. Between 2016 and 2019, it is estimated that the number of insurers who offer cyber insurance coverage increased by 35%. Gross written premiums grew by 34% in 2020 to $7 billion. According to A.M. Best, in the United States alone, insurers underwrote approximately $2.7 billion of cyber insurance premiums in 2020. This was an increase of 21% over 2019. The top 20 cyber insurers in the US market account for almost $2.3 billion of direct premiums written in 2020, or 84% of the market, showing the heavy concentration of the big players.
Insurers who offer cyber insurance must implement technology required to underwrite and administer the product, but they are now also creating technology ecosystems by offering services to augment the insurance. These are often provided by a third party. Businesses may opt to buy these additional services and technology on their own, but in either case insurers are thinking of cyber insurance from an ecosystem perspective. Celent discusses several of these pre- and post-breach services and technologies in our report.
Cybersecurity Insurance Technology Ecosystem
Our research shows that insurance companies are seizing the opportunities generated by cyber threats. Partnerships and ecosystems are currently being built to propose optimal products and to service cyber insurance clients. One of Celent’s Model Insurers, AXA XL, demonstrates how collaborations with expert technology players can play a major role to make a difference in the cyber insurance market. As insurers and their third-party partners continue to uncover new initiatives, Celent will continue to track and report on them.