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Growing Cyber Crime Presents New Opportunity for Insurers
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Cyber insurance has gained increased popularity in recent years due to the rise in instances of cyber crime that calls for insurance against the calamities arising thereafter.
Increasing use of information technology has brought along with it the threat of cyber crime. The digital revolution has created a highly interconnected world with huge sensitive data — personal, business and other—on networks, making many vulnerable to cyber attacks.
Loss From Cyber Crime
Per a PwC report, cyber crime costs the global economy more than $400 billion a year and the costs will continue to rise. Almost 71% of insurance CEOs, 79% of banking CEOs (the highest of any sector) and 61% of business leaders across all industries see cyber attacks as a threat to growth, ranking it higher than shifts in consumer behavior, the speed of technological change and supply chain disruption.
Though this has been a worry for businesses, the same has created growth opportunities for insurers. Per Aon’s latest U.S. Cyber Market Update report, in 2017, 170 insurers reported writing cyber insurance, up from 140 in 2016 and 119 in 2015.
Why Are Insurers Pursuing This Business?
Cyber insurance coverage is one of the insurance industry’s fastest-growing segments, representing a “significant growth opportunity” for U.S. property and casualty insurers, according to a new report by Fitch Ratings.
Despite huge loss that cyber crimes result in, cyber insurance still remains a profitable business for insurers. According to Aon’s report, industry loss ratios dipped from 47.6 in 2016 to 32.4 in 2017, primarily because of a reduction in claims severity. The average 2017 claim size across all companies was $56,688, down from $90,865 in 2016.
The business is also growing in size as U.S. cyber premiums hit $1.84 billion in 2017, up 37% year over year. Profitable results in a new market are attracting new players to the cyber space. According to Allianz projections, the cyber insurance market could hit $20 billion by 2025. The expanding market size provides enough impetus to exploit the business.
Market Still in Nascent Stages
Cyber insurance is a new business compared with other businesses that insurers have been carrying on for ages. Because of this, there remain very little or no past data, making it difficult for insurers to evaluate risk and frame their underwriting rules.
Moreover, the claim from cyber insurance can be huge, which might outweigh the premium received on it. This might lead to a strain on insurers’ capital levels. Therefore, though many insurers are expanding in this space, others are still shying away believing it to be highly risky.
Some of the players active in the cyber insurance are Chubb Limited (CB - Free Report) , American International Group Inc. (AIG - Free Report) , Marsh and McLennan Companies, Inc. (MMC - Free Report) and Willis Tower Watson Public Limited Company .
These players have rolled out products and formed units to provide cyber insurance service. The growing market further provides them enough scope for growth.
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Image: Bigstock
Growing Cyber Crime Presents New Opportunity for Insurers
Cyber insurance has gained increased popularity in recent years due to the rise in instances of cyber crime that calls for insurance against the calamities arising thereafter.
Increasing use of information technology has brought along with it the threat of cyber crime. The digital revolution has created a highly interconnected world with huge sensitive data — personal, business and other—on networks, making many vulnerable to cyber attacks.
Loss From Cyber Crime
Per a PwC report, cyber crime costs the global economy more than $400 billion a year and the costs will continue to rise. Almost 71% of insurance CEOs, 79% of banking CEOs (the highest of any sector) and 61% of business leaders across all industries see cyber attacks as a threat to growth, ranking it higher than shifts in consumer behavior, the speed of technological change and supply chain disruption.
Though this has been a worry for businesses, the same has created growth opportunities for insurers. Per Aon’s latest U.S. Cyber Market Update report, in 2017, 170 insurers reported writing cyber insurance, up from 140 in 2016 and 119 in 2015.
Why Are Insurers Pursuing This Business?
Cyber insurance coverage is one of the insurance industry’s fastest-growing segments, representing a “significant growth opportunity” for U.S. property and casualty insurers, according to a new report by Fitch Ratings.
Despite huge loss that cyber crimes result in, cyber insurance still remains a profitable business for insurers. According to Aon’s report, industry loss ratios dipped from 47.6 in 2016 to 32.4 in 2017, primarily because of a reduction in claims severity. The average 2017 claim size across all companies was $56,688, down from $90,865 in 2016.
The business is also growing in size as U.S. cyber premiums hit $1.84 billion in 2017, up 37% year over year. Profitable results in a new market are attracting new players to the cyber space. According to Allianz projections, the cyber insurance market could hit $20 billion by 2025. The expanding market size provides enough impetus to exploit the business.
Market Still in Nascent Stages
Cyber insurance is a new business compared with other businesses that insurers have been carrying on for ages. Because of this, there remain very little or no past data, making it difficult for insurers to evaluate risk and frame their underwriting rules.
Moreover, the claim from cyber insurance can be huge, which might outweigh the premium received on it. This might lead to a strain on insurers’ capital levels. Therefore, though many insurers are expanding in this space, others are still shying away believing it to be highly risky.
Some of the players active in the cyber insurance are Chubb Limited (CB - Free Report) , American International Group Inc. (AIG - Free Report) , Marsh and McLennan Companies, Inc. (MMC - Free Report) and Willis Tower Watson Public Limited Company .
Each of the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
These players have rolled out products and formed units to provide cyber insurance service. The growing market further provides them enough scope for growth.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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