Continued market hardening in all lines of coverage, most notably in Directors & Officer’s liability, has created a market dynamic where Cyber insurers may begin to seek modest rate increases across their portfolios in 2020 and 2021. While we expect most of our strategic insurer partners to differentiate clients and not paint all customers with the same brush, at this stage it is prudent to caution all clients to expect some potential rate increase from most carriers over, at a minimum, the next 12-18 months.

While we’re not yet in a full-blown hard market in Cyber, Tech E&O has been firmer in recent months as has Media liability due to unfavorable loss development. The trends are very similar to Director’s & Officer’s liability 12-18 months ago, and the shift in Cyber and Tech E&O will likely happen more quickly as Cyber claims have a much shorter tail and insurers have better insight into accident year experience relatively soon after claims are filed. Nearly every insurer cites an increase in frequency and severity of ransomware losses as a significant, and in some cases the only, driver for the market shift.

Ransomware losses, though prevalent across all industries and market segments, may have a disproportionately large impact on middle market Cyber portfolios for many insurers, eroding a key source of underwriting profitability and growth. Ransomware losses have impacted insurer profitability so quickly that many are seeking a trifecta of:

  • Higher premium
  • Higher self-insured retentions
  • Tightening capacity

Whereas in years past there was a steady stream of new market entrants seeking to gain market share which helped keep rates low, 2019 and early 2020 have been marked by a noticeable lack of new Cyber insurers jumping in with both feet. When combined with some insurers leaving the Cyber market entirely in 2019, contraction through M&A activity, and a concerted effort by leading insurers to refocus underwriting and limit capacity exposed to catastrophic Cyber losses, the net-effect in the market is less favorable to Cyber insurance buyers year-over-year.

US:

Some key insurers seeking 5-10% rate increases in 2020 for loss-free accounts; higher scrutiny on excess rates and increased-limits factors

LONDON:

Most underwriters seeking 5-10% rate increases in 2020 for loss-free accounts; 25% or more in tougher industries or where pricing has been “artificially” depressed.

BERMUDA:

Generally following the underlying premium increase with pressure on prior acts coverage and lack of flexibility on warranty language

When clients are preparing to renew their Cyber or Tech E&O insurance, partnering with a broker who has the relationships and skill to differentiate the risk in the marketplace can be the difference between an average outcome and an outstanding outcome. The market no longer supports the ability of any broker achieving an automatic 5% decrease and adding a handful of new enhancements. CAC Specialty’s Cyber and Tech E&O team is comprised of experts who specialize in difficult deals, and our creativity when problem-solving is unmatched.