CHICAGO, June 11, 2019 – Aon plc (NYSE:AON), the leading global professional services firm providing a broad range of risk, retirement and health solutions, today launches the fourth edition of its US Cyber Market Update report, which provides insights, benchmarks, and analyses, for established and prospective cyber insurers.

The study, entitled 2018 US Cyber Insurance Profits and Performance, reveals that a total of 184 US insurers reported direct cyber written premium to the National Association of Insurance Commissioners (NAIC) in 2018, up from 170 in 2017.

The data show that US cyber premiums grew to USD2.03 billion in 2018 – an approximate 10 percent increase from the prior year. Premiums from package business grew modestly, rising six percent year on year, while standalone cyber premiums grew 14 percent. Premiums for small commercial-focused cyber insurers grew 19 percent.

The report highlights that the direct incurred industry loss ratio across all cyber policies was 35.4 percent during the period, with standalone and package business reporting 34.4 percent and 36.8 percent respectively – suggesting that on the whole cyber insurance was quite profitable for US insurers in 2018.

Loss ratios across both the package and total segments deteriorated modestly from 2017, but remained lower than 2015-2016 levels. This deterioration was primarily due to an increase in claims frequency, averaging 4.2 claims per 1000 policies in 2018, up from 3.5 in 2017. This jump in frequency more than offset a reduction in the claims severity, for which the average claim size decreased from USD56,688 in 2017 to USD50,401 in 2018.  This shift toward higher frequency and lower severity reflects many of the claims stories of 2018, including increased activity in ransomware, cryptojacking and formjacking claims. 

The premium per policy also decreased slightly year-over-year due to softening market conditions.

Jon Laux, Head of Cyber Analytics for Aon’s Reinsurance Solutions business, said: “The main cyber story of the 2018 financial year is arguably that there was a lack of a story. US insurers, whilst still achieving good average growth during the 12 months under review, were shown to be growing at a slower pace than the preceding periods, where in both 2016 and 2017 growth rates were above 30 percent. One relative bright spot in 2018 was the small commercial cyber space, where growth is now well underway.  SME risks have been highly desirable to insurers given that cyber claims frequency and severity are both lower for smaller companies.”

Aon’s US Cyber Market Update report reveals that the US cyber market became more concentrated in 2018; the top five cyber insurers accounted for 53 percent of direct written premiums, an increase from 51 percent last year, and the top 10 accounted for 70 percent, versus 69 percent last year.  This was a notable change from 2017, where smaller participants grew more rapidly than the market overall. 

The study is based on data from NAIC Statutory filings.  As such, it is does not include US business written by non-US insurers and provides an incomplete picture of US insurers that write internationally.

Access the report at http://thoughtleadership.aon.com/Documents/201906-us-cyber-market-update.pdf

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