CYBER LIABILITY INSURANCEMARKET TRENDS: SURVEYOctober 2014Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RCYBER LIABILITYINSURANCE MARKETTRENDS: SURVEYGlobal reinsurer PartnerRe collaborated with Advisen to conduct a comprehensive marketsurvey on trends that are shaping the cyber insurance marketplace. The survey is intended togive insurance providers and brokers additional insight into the trends and growth potentialfor data breach and privacy cyber insurance products in the US.IntroductionBetween 2006 and 2013, Advisen’s buyer penetration index shows a five-fold increase inWhile estimates varywidely, the cybercyber insurance purchases, highlighting the growth potential of the emerging cyber insurancemarket.insurance marketWhile estimates vary widely, the cyber insurance market globally represents over 1 billionglobally represents overof written premiums. The vast majority of this is written in the US where about 35 insurers 1 billion of writtenwrite cyber insurance as a stand-alone product, and many more provide the coverage as anendorsement.premiums.The term “cyber liability” means different things to different people. For a corporate riskmanager or CIO the issue is how to identify, quantify, mitigate and transfer the risks that facehis own operations. For an IT service provider it is how to monitor, understand and outwitcyber criminals and develop new tools to prevent cyber crime. In order to serve the needsof their clients, insurance professionals have to understand the implications of the businessrisks faced by corporations and offer effective, affordable solutions to their risk transferneeds.PartnerRe supports several clients that write cyber risk, and recognizes the challenges someof its clients face in this market space due to lack of information. This survey was developedby PartnerRe to provide a starting point for insurance clients and their brokers to makedecisions regarding their cyber liability portfolio.2October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RTwo-thirds of thecarriers surveyed writecyber coverage as bothObjectivesWith this marketplace in mind, PartnerRe and Advisen conducted a survey in August 2014 ofinsurance professionals in the cyber sector, to establish:a stand-alone cover andas an endorsement to anexisting policy. Is demand increasing? By how much? What is driving increasing demand? What industries are driving demand? What are the biggest obstacles to selling cyber insurance? What covers are most valued? What does the future hold?The results provide a fascinating insight into the demand dynamics in cyber insurance.Survey respondentsThe survey received approximately 500 responses. About 45 percent of the respondentswere brokers, 45 percent were insurance carriers, and the remaining 10 percent were riskmanagers and insurance buyers.Two-thirds of the carriers surveyed write cyber coverage as both a stand-alone cover and asan endorsement to an existing policy. According to the survey, more than 80 percent endorseexisting E&O and professional lines policies. About 12 percent attach the cover to D&Opolicies, while the remaining respondents endorse cyber on their General Liability, Property orBusiness Owner policies.The respondents were asked questions specific to their area of expertise, with some questionsaimed at the entire group. For the bulk of this report we combined responses from theunderwriters and brokers that offer or sell cyber products.This report is broken down as follows: Demand and drivers of the insurance marketplace Obstacles to selling coverage Limits management Coverage (business interruption and cyber extortion)3October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E ROne underwriterThe final section of the report, ‘Future growth’, features the responses from those carrierscommented that theand brokers that do not currently offer the product – explaining why they don’t offer it, whateducation of agentsthey see as the demand from their customers, and if they plan on offering the product withinthe next three years.and potential customerswas, “critical to the salein small to mid-sizedbusinesses.”Demand and driversIncreasing demand widespreadThe vast majority of respondents indicated some degree of growth in demand for cyberliability. Very few noted no increase in demand for the product. Supporting this finding,respondents are observing that the “sales cycle has shortened since two years ago,” and “hitratios are improving over the past six months – instead of binding one out of every ten quotes,now binding one out of every five.”Trend in Demand for Cyber Policies/EndorsementsSignificant increase in demandSlight increase in demandBrokersNo increase in demandUnderwritersDon't know0%10%20%30%40%50%60%When asked to highlight the top three drivers of growth in the cyber insurance marketplace,“News of a cyber related loss” featured very strongly, followed by “Increased education andawareness of the product” and the “Requirement to buy the cover by a third party”.One underwriter commented that the education of agents and potential customers was,“critical to the sale in small to mid-sized businesses.” A broker respondent commented thatthe industry “needs to sell the problem first, before discussing coverage.”Surprisingly, more than 80 percent of brokers noted heightened interest in cyber coverageat the C-suite or board levels, but this does not appear to have translated into a significantdriver of sales.4October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RGiven the recent spateof large retail breaches,including Target andHome Depot, it isdebatable how muchcarrier appetite remainsfor these classes,especially retail.Top Drivers of Cyber Coverage Sales According toUnderwriters & Brokers90%80%70%60%50%40%30%20%10%0%News of cyberrelated lossesIncreasededucationRequired by a Board or seniorCost & Coverage Experiencing athird partymanagementcyber relateddemandlossGood salespeopleOtherIn terms of highlighting new industry sectors that show increased demand for cyber liabilityproducts, 78 percent of respondents indicated the retail sector followed by healthcare,financial services, professional services, and utilities sectors.This result is interesting as these industries already represent the strongest buyers of cyberinsurance products. However, the continued increase in demand suggests that rather thanbeing saturated, there is still plenty of scope for growth in these highly exposed sectors.Given the recent spate of large retail breaches, including Target and Home Depot, it isdebatable how much carrier appetite remains for these classes, especially retail.Industry Sectors Underwriters Note Increase in Demand forCyber Liability 5October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E ROne broker commented: Obstacles to selling coverage“I believe agents don’tAs with many technical areas of insurance, carriers and brokers require a high level ofsell more or approachspecialist expertise and skill in order to sell cover and grow the line of business. According tocustomers enoughthe survey, the majority of brokers selling cyber insurance today have a degree of expertise inbecause they lackthe industry.confidence in talkingSixty-four percent of carriers said that the majority of their business came from brokers orabout the coverageagents specializing in cyber insurance. When asked about their own level of expertise in theand exposures with thecyber sector, 65 percent of brokers considered themselves “moderately knowledgeable” onclient.”the subject, while 29 percent were “extremely knowledgeable”.A broker viewIn their role as intermediary between the clients – and importantly, potential clients – and thecarrier, brokers have a broad view of market dynamics.In response to the question, “What are the biggest obstacles to selling this [cyber] coverage?”one answer clearly stood out: “A lack of exposure understanding”.Seventy-three percent of respondents felt that the insured’s lack of understanding of theexposure was the main obstacle. One broker called the sales process, “an uphill battle”, withIT professionals unwilling to accept that their systems could be compromised. Others notedthat, “many mid-market clients are still in denial regarding the exposure” or they had “anever-happen-to-me attitude” to the risk.Closely related, a lack of insurance product information and knowledge on behalf of thebrokers was another major factor, according to 48 percent of respondents. One brokercommented: “I believe agents don’t sell more or approach customers enough because theylack confidence in talking about the coverage and exposures with the client.”The cost of cover – or more pointedly, the lack of provision in corporate budgets for cyberinsurance – was another significant obstacle cited by 47 percent of respondents.6October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RAlmost 40 percentObstacles to Selling Cyber Coverage According to Brokers80%of underwriters that70%60%provide endorsements50%40%agreed that aspects of30%20%the underwriting process10%0%hindered the sale ofendorsements for cyberinsurance.In fourth place, brokers felt that the cumbersome application was an obstacle to sellinginsurance.An underwriter viewAlmost 40 percent of underwriters that provide endorsements agreed that aspects ofthe underwriting process hindered the sale of endorsements for cyber insurance. Typicalcomments were: the “application is very cumbersome,” “supplemental applicationscan be pretty extensive for the endorsement,” “many clients will not be able to provideall the additional documentation for the underwriting process,” and “applications areoverly complicated for smaller risks.” This highlights one area in which there is room forimprovement for some of the smaller risks.Limits managementOf those clients already buying cyber insurance cover, there is a trend towards higher limits.Fifty-seven percent of carriers reported that they “sometimes” received a request for higherlimits, while 37 percent said that this occurred “frequently”. Given how few carriers had“rarely” or “never” received such a request, there is a clear trend towards increasing demandfor higher limits.7October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RFirst party coverageFrequency in Requests for Higher Limits According toUnderwritersresponding to a data60%breach e.g. notification,50%credit monitoring,40%forensics, etc. is the30%primary driver of the20%cyber liability product.10%0%FrequentlySometimesRarelyNeverDon't Know Brokers were asked a similar question with the intent to measure how often they had to goto different markets to secure a placement. Given that more than half of broker respondentssaid they had to build a tower at least “sometimes” it would appear that there is anincreasing need for excess market capacity.Frequency that Limits Requested Are Higher Than One CarrierCan Provide According to metimesNeverDon't KnowCoverage: business interruption and cyber extortionFirst party coverage responding to a data breach e.g. notification, credit monitoring, forensics,etc. is the primary driver of the cyber liability product. Other coverage extensions to the cyberinsurance policy include business interruption (BI), contingent business interruption (CBI),and cyber extortion.8October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RWhen asked whetherThere have been increasing discussions and awareness around these other coverages, and sothey were seeing anrespondents were asked to rate the change in demand for BI, CBI, and extortion coverage.increase in demandWhen asked whether they were seeing an increase in demand for these covers, the responsesfor these covers, thevaried greatly between BI and CBI. More than half of brokers and underwriters noted aresponses varied greatly“slight” increase in demand for BI cover, with 20 percent seeing a “significant” increase.between BI and CBI.Trend Underwriters and Brokers Seeing in Demand forBusiness Interruption60%50%40%30%20%10%0%Seeing a significant increase indemandSeeing a slight increase indemandNo increase in demandDon't knowHowever, growth in demand for CBI was more muted, with over a third of respondents notingno increase in demand for this cover. This is reflected in the market as not all carriers offerthis coverage, with no push by insureds to increase availability at this time. One respondentnoted that “the lack of interest in the BI and CBI are due to lack of knowledge about theexposure and coverage options available,” and another notes that “the client relies upon us,the agent, to make sure their exposures are covered – they do not have knowledge of specificcoverage such as cyber extortion or business [interruption].”9October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RCyber extortion,considered a real riskfor businesses, was notdeemed to be an areaof growth by almost50 percent of brokersand carriers, possiblybecause this crime doesTrend Underwriters and Brokers Seeing in Demand forContingent Business Interruption40%35%30%25%20%15%10%5%0%Seeing a significant increase indemandnot receive extensiveSeeing a slight increase indemandNo increase in demandDon't knowmedia coverageCyber extortion, considered a real risk for businesses, was not deemed to be an area of growthcompared to databy almost 50 percent of brokers and carriers, possibly because this crime does not receivebreaches.extensive media coverage compared to data breaches. Data on this exposure is more difficultto obtain as most incidents go unreported, yet the threat is real as criminals can threaten toshut down a website, or release data, unless the company pays, putting small and mid-sizedentities in particular at risk.Trend Underwriters and Brokers Seeing in Demand for CyberExtortion Coverage60%50%40%30%20%10%0%Seeing a significant increase indemand10October 2014 Advisen Ltd.Seeing a slight increase indemandNo increase in demandDon't knowSponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E RVery few brokers andPolicy standardizationunderwriters blamedThere were no other coverage-related questions, but respondents were provided with anthe lack of demand,opportunity to provide commentary, and it is worth noting that many respondents addressedcapacity or inadequatecoverage issues. Brokers and underwriters were frustrated by the lack of standardizedcoverage in the market. As one respondent put it, “forms differ [and] you really need topricing for stalling thereview forms, options, conditions and exclusions to appropriately discuss benefits withmarket growth withclients.” Another respondent noted that there is a “continuing need to educate producers/less than a quarterof respondents citingaccount managers on the exposures, differences between carriers/forms and service offerings– still too much selection based solely on pricing without understanding the nuances betweenforms.”these reasons.Future growthRespondents not currently selling or offering cyber insurance, were asked: “What are thereasons for not selling/offering cyber policies and/or endorsements?”The main reason for not selling or offering more cyber policies was due to lack of expertise(47 percent) or an inadequate understanding of the risk (18 percent). Some brokers (Other)also admitted they hadn’t yet committed to offering cyber as part of their product suite.Very few brokers and underwriters blamed the lack of demand, capacity or inadequate pricingfor stalling the market growth with less than a quarter of respondents citing these reasons. What are reasons for not selling/offering cyber coverage?60%50%40%30%20%10%0%Lack of Expertise11October 2014 Advisen Ltd.Fear of RiskInadequate PricingLack of CapacityLack of DemandSponsored by:Other
Cyber liability insurance market trends: surveyW H I T E PA P E RTo gauge an untappedTo gauge an untapped market, brokers and underwriters who didn’t currently offer a productmarket, brokerswere asked to estimate what percentage of their customers were interested in buying cyberand underwriterswho didn’t currentlycoverage. Almost half the respondents said that “less than 25 percent” of their clients wereinterested in the cover. That said, over 25 percent of respondents indicated that they have asizeable customer base interested in buying cyber coverage.offer a product wereasked to estimatewhat percentage oftheir customers wereinterested in buyingcyber coverage.Approximate Percentage of Customers Estimate Interested InBuying Cyber Coverage50%45%40%35%30%25%20%15%10%5%0%Less than 25%25% to 50%50% to 75%75% or moreThe market is on track for continued growth, with 60 percent of respondents stating that theyintend to start offering or selling cyber insurance in the next three years.Will start selling/offering Cyber Coverage in next 3 years70%60%50%40%30%20%10%0%YesNoDon't knowRecommendationsBased on these findings, it is clear that extensive media coverage of high-profile cyberevents – coupled with an increased level of expertise and tailored cover in the insurancemarketplace – have driven higher demand for cyber insurance in recent months. However,12October 2014 Advisen Ltd.Sponsored by:
Cyber liability insurance market trends: surveyW H I T E PA P E Rclients’ awareness of their own risks and their unwillingness to spend money on insurance arecreating a drag on growth in the sector.In order to see real growth in the sector, carriers and brokers have a combined role to play incontinuing to educate clients, potential clients and other insurance agents and brokers onthe benefits of cyber insurance. Only then will the market be in a position where insurancecapacity does not outstrip demand.About PartnerRePartnerRe is a leading global reinsurer providing multi-line reinsurance to insurancecompanies for all lines of business including cyber related risk.PartnerRe has dedicated underwriters and actuaries working on cyber liability business, andcan provide the expertise insurers are looking for in a reinsurance partner. To get in contactwith one of our cyber experts, go to http://www.partnerre.com and click on “Find an Expert”n13October 2014 Advisen Ltd.Sponsored by:
CYBER LIABILITY INSURANCE MARKET TRENDS: SURVEY WHIT A Sponsored by While estimates vary widely, the cyber insurance market globally represents over 1 billion of written premiums. CYBER LIABILITY INSURANCE MARKET TRENDS: SURVEY Global reinsurer PartnerRe collaborated with Advisen to conduct a comprehensive market survey on trends that are shaping the cyber insurance marketplace. The survey is .
2018 Survey of Cyber Insurance Market Trends Supporting Raw Data 1 We are pleased to present key raw survey data from our 2018 Survey of Cyber Insurance Market Trends, with the aim of increasing transparency and widening the potential for extended use and analysis across the industry.
Cyber Vigilance Cyber Security Cyber Strategy Foreword Next Three fundamental drivers that drive growth and create cyber risks: Managing cyber risk to grow and protect business value The Deloitte CSF is a business-driven, threat-based approach to conducting cyber assessments based on an organization's specific business, threats, and capabilities.
Cyber insurance market growth: 10 The need for a more sustainable solution Cyber sustainability: 12 Genuine protection at the right price Conclusion: 17 Sharpening differentiation and return Contacts 18. 4 PwC Insurance 2020 & beyond: Reaping the dividends of cyber resilience Cyber insurance is a potentially huge, but still largely untapped, opportunity for insurers and reinsurers. We estimate .
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Market solutions like cyber insurance have potential Challenges Insuring can backfire . Fiduciary frequency and severity trends.” “The Limit of Liability factors are taken from our Miscellaneous Professional Liability product.” “Base rates for each module of this new product were developed based on currently filed Errors and Omissions and Internet Liability rates .
With our reliance on ICT and the value of this data come risks to its security, integrity and failure. This cyber risk can either have a natural cause or be man-made, where the latter can emerge from human failure, cyber criminality (e.g. extortion, fraud), cyberwar, and . Ten Key Questions on Cyber Risk and Cyber Risk Insurance 9 Table 1 .
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risks for cyber incidents and cyber attacks.” Substantial: “a level which aims to minimise known cyber risks, cyber incidents and cyber attacks carried out by actors with limited skills and resources.” High: “level which aims to minimise the risk of state-of-the-art cyber attacks carried out by actors with significant skills and .
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Cyber crimes pose a real threat today and are rising very rapidly both in intensity and complexity with the spread of internet and smart phones. As dismal as it may sound, cyber crime is outpacing cyber security. About 80 percent of cyber attacks are related to cyber crimes. More importantly, cyber crimes have
cyber insurance is expected to become a fast-growing market segment in the near future due to the rapidly increasing exposures consumers face today. The benefits of such an insurance product to individuals and families can range from support in improving people’s cyber security posture to financial compensation and expert help in the aftermath of a cyber incident. But for insurance companies .
Also, traditional insurance market issues apply to cyber insurance, including moral hazard and adverse selection caused by information asymmetry. For example, there is a moral hazard associated with companies that may not feel the need to improve cyber security if they are insured . Other cyber insurance challenges include a lack of
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The cyber insurance market continues to evolve, with ransomware events causing major concern for cyber insurers. The list of global cyber incidents, many of which have insurance, is staggering: Data breaches stemming from university use of exam Proctor software The Australian Prime Minister’s announcement of ongoing state-sponsored .
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rotational motion and astrophysics can have impacts on our lives, as well on the environment/society. This application and development of skills can be achieved using a variety of approaches, including investigation and problem solving. The Unit will cover the key areas of kinematic relationships, angular motion, rotational dynamics, gravitation, general relativity, and stellar physics .