From "Oh, My!" to "Ho-Hum" in Record Time

By: Dr. Gary Anderberg

Jun 03, 2024 — Not too long ago, the mere mention of cyber insurance gave most risk professionals a frisson of barely suppressed horror, but a new report from Fitch Ratings tells us that:

"Despite two underperforming years in 2020 and 2021, the direct incurred loss and defense and cost containment (DCC) expense ratio for standalone cyber coverage remained relatively steady at 44% in 2023, compared to 43% in 2022. This ratio has averaged a profitable 48% over the nine years that cyber supplemental data has been available." (Risk & Insurance, 2024)

So we've gone from the Wild West to almost boring and respectable nowadays.

Fitch attributes much of this improvement to (a) more realistic pricing based on better claim data and (b) better cyber hygiene and risk modification, often at the insistence of carriers and brokers. The Securities and Exchange Commission (SEC) is also doing its part by requiring better cyber management disclosures in public filings. For all the gory details, check out the Fitch report at U.S. Cyber Insurance Maintains Strong Profits; Premium Growth Slows.

The seriously good news here is that the rigorous and continued application of solid underwriting and loss engineering practices and principles can tame even an extraordinary beast like cyber risk over time. Looks like Warren Buffet was right again when he said, "Risk comes from not knowing what you're doing." Now we know.