Cyber Insurance Predictions & Trends For 2023?

Over the past decade, Cyber Insurance has slowly moved to the forefront of a business’s robust risk management strategy and firms have become increasingly eager to implement this product into their insurance portfolios. A new report by P&S Market Research Global states that the global Cyber Insurance market could reach ￡14bn throughout 2023 with a compound annual growth rate of over 20%.

In 2022, we have had our most successful year to date for Cyber Insurance programs with exponential growth in risks that need to be placed in the London and Lloyd’s market, however, we need to look forward and understand the drivers and obstacles of success in 2023.

Below I have noted a few of the predictions and trends that will steer the course of the Cyber Insurance industry in 2023 and how this may benefit or be of detriment to your Cyber Insurance strategy in the new year.

Innovative Underwriting

Throughout 2022, we have seen new underwriting techniques being employed by underwriters to scrutinise the plethora of risks finding their way to their inbox with many opting to utilise scanning technologies to identify cybersecurity vulnerabilities within an organisation. This is a stark change to the traditional method of underwriting and allows the underwriter to get up close and personal and understand the risk in detail.

In 2023, insurers will move to this more intrusive method of underwriting and shy away from proposal form-based presentations as well as innovate with new methods such as AI-based underwriting which looks to be on the horizon from many start-up companies looking to disrupt the norm of insurance as we know it.

New Entrants?

2022 was a year for new entrants into the Cyber Insurance market with a plethora of MGAs joining to establish themselves amongst the traditional insurers we have utilised in the past. From innovative InsureTechs to MGAs solely focusing on Microbusinesses, from an insurance broker’s standpoint, it is the most competition we have seen in the market for many years and allows for the insured to have options when it comes to implementing cyber or when looking to move at renewal. This year, I anticipate this trend to continue with plenty of new entrants coming to market along with existing insurers widening their appetite with larger line sizes and entering the primary insurance space.

Rate Stabilisation

With new entrants comes more competition and with more competition comes lower premiums. In 2023 I predict that rates will start to even out and the industry will not revert to the trend we have seen over the past 5 years of increasing premiums year on year. With more competition, improved loss ratios, in-depth underwriting, and improved risk management amongst applicants, I can only see the large increases of the past will start to stabilise.

Baseline Security Requirements Strengthened

With the increasing sophistication of ransomware attacks and despite improvements in cyber hygiene and risk management over the past decade, insurers have become more demanding in their minimum security requirements to obtain coverage. No longer are the days of firewalls and antivirus being enough to obtain coverage but in 2023, we will see the continuation in the demand for best-in-class cyber security controls including Multi-Factor Authentication, use of VPNs in remote access and Endpoint Detection & Response along with mandatory Privileged Access Management and ongoing vulnerability scanning and detection.

Ransomware Resurgence

Funds Transfer Fraud overtook Ransomware as the main source of Cyber Insurance claims in 2022 as reported by Corvus’ Risk Insights Index, covering 36% of their cyber claims, however this year I foresee Ransomware reclaiming the top spot. With significant ransomware threats such as Ryuk, BitLocker, Royal, and WastedLocker along with the emergence of a new threat in Ransomware-as-a-Service (RaaS), attacks have become easier to perform and more sophisticated in evading cybersecurity controls and therefore look to be in prime position for the top spot for cyber claims in 2023.

Increased Cyber Regulation

Over the course of 2022, we have seen a large increase in client contracts requiring certain limits of Cyber Insurance whereby market forces have taken it upon themselves to demand risk management and insurance protection from their suppliers, vendors, and clients although, in 2023, I predict less reliance on a laissez-faire, free market approach with regulators across many sectors looking to impose a minimum level of cyber insurance and risk management across their members. In October 2021, the SRA amended their minimum terms and conditions for Solicitor’s PI cover that required insurers to make it clear that cyber exposures are not covered by Professional Indemnity policies, whilst this is not imposing cyber insurance on their members, it is making it clear that it is a real exposure that needs to be taken seriously. In 2023, I anticipate this is replicated across other regulatory bodies and there is a serious discussion on whether cyber protection should be mandatory.

Summary

As with all articles on trends and predictions, this is not an exhaustive list and there will be plenty of other variables and driving factors that will affect the Cyber Insurance industry in 2023. However, one theme that has remained constant is that the need for Cyber Insurance in a firm’s insurance program has become critical in today’s digital business environment.

Please feel free to share your thoughts or predictions for the 2023 Cyber Insurance market or should you require any assistance in placing a cyber risk in the London or Lloyd’s market, feel free to get in touch at?[email protected] ?or 02030263686