Cyber insurers will report a material improvement in loss ratios in 2022, based on preliminary data, says a credit rating agency report issued Tuesday.
Toronto-based Morningstar said in its cyber insurance report that loss ratios increased significantly from 2018 to 2020, resulting in higher prices and hardening market before improving slightly in 2021.
It predicts that as the market grows and matures, insurers will progress in accumulating enough data and claims experience to become more comfortable in evaluating the risk, which may result in increased pricing stability and loss ratios for the sector, assuming they can deal with cyberattacks’ “increasingly sophisticated and innovative nature.”
Cyber risk “can be vulnerable to mispricing given that losses can fluctuate widely and, in some cases, can be extremely high,” the report warns.
It says also while reinsurance’s availability and affordability may limit its growth, cyber insurers can benefit from high demand that is uncorrelated with severe weather events, as well as from the opportunity to deepen their relationships with policyholders.
