AIG, Chubb, XL Lead in $1 Billion U.S. Cyber Insurance Market: Fitch

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About 120 U.S. insurance groups wrote an estimated $1 billion in cyber insurance direct written premiums in 2015, according to Fitch.

Fitch aggregated the cybersecurity statutory supplement data for the U.S. property/casualty (P/C) insurance industry and analyzes the cyber insurance market share and performance in a special report, “U.S. Cyber Insurance Market Share and Performance.”

The largest writers according to Fitch’s analysis are American International Group Inc., accounting for approximately 22 percent of the market, Chubb Limited at 12 percent, and XL Group Ltd. at 11 percent.

The P/C insurance industry sees cyber-related insurance coverage as a significant growth opportunity. Insurance broker Marsh & McLennan has estimated that in 2014 the global insurance market wrote approximately $2 billion in cyber insurance premiums, which could multiply by a magnitude of three to five times by 2020.

“Industry estimates suggest that the global cyber insurance business could increase to $20 billion by 2020, but the lack of information on cyber insurance is a challenge for insurance companies, policyholders, regulators, and investors to evaluate and price risk,” said James Auden, managing director, Fitch Ratings. “Challenges in isolating cyber related premiums and exposures from other risks within a package policy create limitations in analyzing the supplemental filing as total cyber insurance premiums are likely understated.”

The nature of the new supplemental data filing leads to more limited information regarding underwriting results from cyber business, as information is provided solely on a direct basis and does not include information for incurred losses net of reinsurance and underwriting expenses.

The P/C industry’s direct loss ratio for cyber stand-alone business, which accounts for almost half of all the business, in 2015 was 65.2, according to Fitch.

“The ultimate profitability of the P/C industry’s cyber insurance efforts will take some time to assess as the market matures and future cyber-related loss events emerge,” said Gerry Glombicki, director, Fitch Ratings.

Fitch said it will track premium volume and loss ratios over time under this new supplement to gauge the performance of the cyber insurance market and activity of individual companies.