September 13, 2017 by Fred Eslami, Senior Financial Analyst, A.M. Best Company
As the profile, frequency and severity of cyber attacks continue to gain in scope and potential impact, insurers have become increasingly aware of the correlating risks and rewards in this growing line of business. Given the seriousness and scale of attacks in 2016 and 2017, as well as the modelled damage estimates that continue to materialize, an abundance of underwriting opportunities clearly wait ahead.
Industry observers have predicted that the cyber line of business will be a leading growth area in the property and casualty space, with an amalgamation of estimates from different industry sources suggesting cyber coverages will increase to between US$7.5 billion and US$20.0 billion by 2020. Despite the 34.7% growth in direct premiums reported by companies in the United States from 2015 to 2016, it is too early to determine if these growth projections will come to fruition.
Demand for coverage increases after every reported breach, but whether this appetite will be sustained remains to be seen. There is another more pressing and overarching question regarding the uncertainty of this risk, one that demands insurers exercise prudent underwriting practices and appropriate risk management and mitigation measures.
The capabilities of insurance companies to analyze, aggregate, monitor and manage cyber exposures under various scenarios must continue to be explored. Data quality remains a key factor when insurers provide information to regulators, other stakeholders and rating agencies, for example, and is an area that continuously needs to be refined.
Read the full article in the Digital Edition of the August 2017 Canadian Underwriter.
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Fred Eslami, Senior Financial Analyst, A.M. Best Company
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