AM Best is maintaining its stable outlook on the global cyber insurance segment, as demand for coverage remains robust despite a softening in pricing. Additional factors in this outlook include continued digitization, expanding regulatory requirements and an increasing awareness across industries to potential exposures.

The Best’s Market Segment Report, “Market Segment Outlook: Global Cyber Insurance,” states that profitability in the cyber insurance segment is expected to remain favorable over the intermediate term, although margins may moderate amid increased competition. Ongoing enhancements are also being crafted with respect to cyber security hygiene, driven by greater investment in prevention, resilience and incident response.

“Our stable outlook on the segment reflects solid demand for coverage, even as the market pricing softens, in addition to favorable profitability over the intermediate terms and the growing use of AI,” said Cristian Sieira, senior financial analyst, AM Best.

Despite those favorable factors, headwinds for the segment remain and include persistent and evolving threat activity, particularly ransomware, business email compromise and funds transfer fraud. The report notes that these factors are escalating and driving large loss potential.

“Insurers remain valuable targets of cyber-attacks due to the concentration of sensitive policyholder and exposure data, increasing their own operational and aggregation risk,” said Todor Kitin, associate director, AM Best. “Ongoing geopolitical uncertainty is also contributing to an increased cyber threat environment.”

Businesses in highly regulated segments, such as healthcare and finance, face stringent requirements due to the highly sensitive nature of the client data in their possession. Cyber insurance has become an essential component of risk management and regulatory compliance strategies, helping organizations manage the high costs associated with data breaches and regulatory actions.

The report also notes that premium rates charged for cyber-related coverage have undergone persistent declines and are not expected to stabilize in the near future, but in the event of any rapid increase in the frequency and severity of incurred claims, a more notable future upward price correction is possible. However, AM Best notes a slight uptick in the loss ratio over the last three years, while remaining profitable.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=366507.

To view a related video, please visit http://www.ambest.com/v.asp?v=ambcyber726&AltSrc=182 .

AM Best Associate Director Fred Eslami and Senior Industry Analyst Christopher Graham will participate in an upcoming online analytical briefing on cyber insurance trends. Additional panelists will include Ariel Evans, president RiskQ; Roman Itskovich, founder and chief risk officer, At-Bay; Judy Selby, partner, TittmannWeix. The briefing is scheduled for Thursday, July 23, at 10:00 a.m. EDT. To register for the virtual briefing, please visit here.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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