The market for cyber liability insurance is facing a crossroads. The growth and the increase in that industry in that marketplace are projected to be huge over the next few years but at the same time, unless there are changes to how these products and policies are underwritten, there may be a problem in getting it out to the masses. What do we mean by that? 

Well, the last calendar year 2021 shows that cyber insurance premiums came in at $9 billion. That’s a very significant number for a single line of commercial insurance. Many other types of insurance have existed for many years took quite a bit longer to get to that level of coverage. What about future growth? While they’re projecting it’s going to keep increasing 25% per year to 22 and a half billion more than double in the next couple of years. Think about it. There’s really no other commercial line of the insurance market that grows at that rate of 25% per year. That’s huge and that’s because the buyer’s markets and customers recognize the importance of having this type of risk mitigated in their company. If you’re a small business medium business large business you’re starting to recognize you can’t go without this cyber insurance policy. You’re going to be in big trouble if you have some type of event, which messes up your company because of a cyber loss. So that’s the good news that people are recognizing this risk. The bad news is a growing number of insurers are hesitating to underwrite large risks. And some have decreased their appetite because of the freak and severity of cyber attacks. So whether you’re currently insured under a cyber policy or not understand that the insurance companies are recognizing that there is an increased frequency and severity of cyber-attacks and systemic vulnerabilities. This has happened because there are more attacks but also because the cyber attack vector is bigger now, meaning that every company has as we have behind them multiple computers and modems and routers and electronic devices. Sometimes they’re wireless devices sometimes their 5g devices every year every company increases exponentially the number of devices on their network even phones around your network sometimes your smoke detectors on your network. All of those represent an attack vector to your company into your network. This is making it easier for hackers to get into the company’s electronic systems, and technical systems and wreak havoc do damage, and do ransomware. 

So if you’re a company you’re not immune to this happening to you. Most companies recognize this that’s why the cyber insurance market’s growing by 25% per year. But the underwriting hasn’t kept up with that. Many insurers are developing wording to shift risk exposures. What that means is there are contract conditions that make the company the insured be equally responsible for the loss. Now that doesn’t necessarily mean as an insured you have to pay for losses but what it is doing is making sure that the policyholders be aware that they need to do prevention and reasonable due diligence to not make it easy for hackers to get into your network. That’s part of your policy commitment that you have, for example, you might have to make sure that you have multi-factor authentication and place updates and patches on all your software patches on your hardware. So the insurance market for cyber having more robust underwriting is a good thing because it helps insureds prevent an issue from happening in the first place. But also it keeps your policy availability in place because the insurers aren’t realizing significant or excessive losses because if they did, they would just either have to cancel policies or charge more money for them. And that might not make it affordable for some companies. So having a very good mitigation plan in place whether it’s initiated by your insurer or by your company itself is a good way to keep your policy availability and pricing at a reasonable level.

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