The majority of SME cyber insurance policyholders saw their premiums increase in 2022 amid an increased level of risk following the long-term impact of COVID-19 and the Russia/Ukraine conflict. Over the last two years, the cyber insurance market has been characterised by a high number of claims, severe losses, rising premiums, a decrease in insurer appetite, and an increased focus on accumulation risks.
However, there is reason for cautious optimism as we consider the remainder of 2022. Rate hikes are expected to stabilise and insurers are likely to reward robust cyber hygiene practices.
According to GlobalData’s 2022 UK SME Insurance Survey, 56.9% of SMEs now pay higher premiums for cyber insurance. Among this group, the level of cover increased for only 13.7%, while 31.5% saw their level of cover remain the same and 11.7% saw it decline.
Furthermore, only 36.3% of SMEs saw their premiums remain the same; the majority of these companies saw their cover reduce or remain unchanged. This highlights that while the cost of cover is increasing, the level of cover provided is not.
However, Marsh reports that the rate of growth in cyber insurance premiums has slowed down. According to Marsh, the average rate of premium increases for cyber insurance has slowed down by almost 80% in recent months. As of July 2022, the average rate increase was 54%, down from a high of 133% in December 2021.
As time goes on, the shape of a more stable market is becoming increasingly visible. On the strength of this momentum, the market will keep moving in the direction of stabilisation. Carriers are enhancing their risk engineering and management capabilities; there is more communication between the insurance industry, businesses, governments, and law enforcement; and new capacity and insurers continue to enter the cyber insurance market. Organisations are also improving their cyber hygiene, as insurers continue to cut back on ransomware cover (or exclude it altogether) if clients have poor controls in place.