Q1 2023
This update is a general overview of the key developments in the GB cyber insurance market; we will analyse the current conditions for WTW clients both international and UK based companies using the London insurance market to transfer risk.
During Q1 2023 the GB cyber insurance market saw further improvements for clients with additional levels of insurer competition.
In particular:
All of these key developments will be covered within this update.
Q1 2023 has seen strong competition from insurers to deploy capacity on both primary and excess layers, with a notable increase in the number of insurers competing for primary positions. This provided options for existing cyber insurance buyers to purchase increased policy limits, a trend which we have observed with increasing frequency, with clients increasingly using savings achieved (in renewing their existing total limits) to purchase additional capacity.
Further new capacity has already entered the cyber market in 2023, with a number of insurers identifying continued demand for cyber insurance capacity from both existing and new buyers.
USD10m remains a common average amount of capacity offered per insurer; however, some insurers are now offering limits/capacity in excess of USD10m. During Q1 2023 cyber insurance buyers used this increased flexibility and competition to achieve optimum results, with some securing reductions of over 25%.
WTW’s new excess layer facility “CyXS”, offering up to USD/GBP/EUR 50m of excess capacity, has been used by a number of clients in Q1 2023 with a number also purchasing the CyXS restore function, which provides the option to purchase a reinstatement of limit at pre-set pricing, giving further options for clients to consider.
Pricing in Q1 2023 has been more stable than recent quarters, removing exceptionally high and/or low pricing, relative to the placement in question. Pricing reductions were achieved with increasing regularity.
Common reductions of around 10-25% were often available in Q1 2023, however this is not the default position and is influenced by a number of factors, including the amount of capacity purchased, as this generates differing levels of opportunity for restructuring placements.
There were some exceptions to the pricing trends outlined above, but these were confined to placements where a company’s risk controls were perceived as insufficient, there had been claims activity, or where the current pricing was still perceived as too low/inadequate.
In terms of self-insured retentions, these have continued to stabilise. In an increasing number of cases, insurers have been willing to provide alternative lower options/structures, particularly where they are competing to secure new business.
Buyers who see pricing as a key consideration will need to navigate the market with a well thought out strategy (hand-in-hand with their broker) to ensure the best results are achieved, including factoring-in the amount of capacity they wish to purchase, as this may well impact the overall strategy.
Lloyd’s of London (“Lloyd’s”) issued a market bulletin on 16 August 2022,[1] which outlined its minimum requirements with respect to nation state cyber-attack exclusions. Lloyds Market Association issued a further bulletin on 20th January 2023, detailing model clauses with ‘A’ and ‘B’ versions to cater for differing approaches concerning the attribution of an incident to a state.[2]
Lloyds syndicates were required to comply with Lloyds minimum requirements for business incepting on or beyond 31st March 2023, therefore the interpretation of the 16 August 2022 bulletin (by competing Lloyds syndicates) and client’s response(s) to these approaches (war exclusions offered) will become clearer for business being placed during Q2 2023 and beyond.
We expect insurers potentially differing approaches to these exclusions will directly influence the client’s decision to retain (or add) the insurer(s) in question to their cyber insurance placement, and such differing approaches may well lead to insurers being replaced by another competitor.
WTW’s focus in this area is first and foremost to listen to clients regarding such exclusions and to ensure they are given expert advice in order to allow them to make informed decisions. We expect to see an ongoing evolution of the exclusions that insurers are willing to offer throughout 2023, especially where insurers believe they are at a competitive disadvantage compared to peers.
We have observed the following trends in our 2023 Claims Analysis Report:
In further suggestion of a shift in the ransomware landscape, Coveware note that in In Q1 of 2023, 45% of attacks had an initial demand over $1 million, an all-time high.
Given the highly changeable claims trends throughout 2021, 2022 and into 2023, it feels prudent to expect the unexpected, suggesting to us that existing cyber insurance buyers should continue to maximise the opportunities of a more favourable market to purchase additional limits whilst none-buyers should review the options available to put cyber insurance in place.
WTW offers insurance-related services through its appropriately licensed and authorised companies in each country in which WTW operates. For further authorisation and regulatory details about our WTW legal entities, operating in your country, please refer to our WTW website. It is a regulatory requirement for us to consider our local licensing requirements. The information given in this publication is believed to be accurate at the date of publication shown at the top of this document. This information may have subsequently changed or have been superseded and should not be relied upon to be accurate or suitable after this date.
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GB Cyber Insurance Market Update | 4.7 MB |