Cyber Market Update

The last few years saw the global cyber insurance market undertake a major phase of correction following increased cyber claims frequency and severity. All the hallmark traits of a hard market were evident with significant rate and retention increases, capacity concerns alongside restricted terms and conditions. The cyber market replicated what occurred in the Directors’ & Officers’ (D&O) market and in other lines, but in a much shorter time period. Q1 of 2022 saw these trends continue, however the good news is that the latter half of 2022 has seen market conditions improve. Focusing on pricing alone, if we look back to the beginning of the year the question was whether we would see compounding rate increases over 2021. To be clear the market will never return to its historical pricing as minimum premiums have increased to reflect the catastrophic nature of losses. However the market cycle continues to accelerate faster than anticipated and premiums are stabilising. As an example, for organisations that can demonstrate a high level of information security posture, Gallagher has seen rate increases drop to between 15-35% at the end of Q3. That being said for risks with sub-optimal cyber security maturity, insurers still continue to push 50-75% increases reflecting the increased level of risk they are taking on. Where we have seen a major reduction in pricing though has been on excess layers, predominantly driven by new capacity. Looking to capitalise on market conditions Q2 saw several new entrants to the London cyber market. In conjunction with an improving claims climate driven by a drop in ransomware incidents there is significantly increased competition for renewing accounts in Q3 and Q4.

Ever a dynamic and evolving class of insurance, the cyber market has never been one to pause for breath. Technological, systemic and political events will dictate where the cyber market ventures in 2023 and beyond. To offer some insight we’ve engaged three of Gallagher’s key partners in the breach response (DAC Beachcroft), risk management (Another Day) and underwriting (Pen Underwriting) sectors, to look more in depth at some of the trends seen throughout 2022.