Credit ratings agency AM Best expects the momentum for rate increases the US cyber insurance market to continue over the medium term as a result of the COVID-19 pandemic.
According to a report from the firm titled ‘Cyber Insurance: Profitability Less Certain as New Risks Emerge’, rates in the cyber market were already increasing by 4% to 5% even before the pandemic due to concerns about growing ransomware attacks and data breaches.
Nevertheless, the ongoing pandemic has been compounding cyber risk and many COVID-19 cyber attacks have been geographically targeted using local events.
In the US, for example, Microsoft reported that cyber attacks surged following the first COVID-19 death, the announcement of the international travel ban and the 100,000th death from COVID-19.
The tech giant noted that, globally, COVID-19-related cyber attacks peaked in the first half of March, but is less certain that the total number of attacks is actually rising.
It believes that would-be attacks have been repurposed for COVID-19, based on the view that the number of global malware attacks has not differed significantly compared to before the pandemic.
At the same time, the FBI has warned of an increase in certain types of cyber attacks, such as ‘business email compromise’ owing to the pandemic.
In the cyber insurance market, reinsurers have been generally receptive to cyber and both quota shares and catastrophe-like reinsurance structures have become more common according to AM Best.
Insurers are also looking at reinsurers as partners in risk selection and to help them frame their risk appetites and limits.
However, pricing strategies remain underdeveloped as insurers are still relying on rule of thumb heuristics (such as revenue and number of records) as opposed to actuarial data to come up with prices.