Selective underwriting has brokers fitting clients 'like a puzzle piece' to insurers: RPS
Advisen
Selective underwriting has brokers fitting clients 'like a puzzle piece' to insurers: RPS
By Alex Zank, Advisen
More stringent policy wordings, and consequently more selective underwriting appetites, means cyber brokers more than ever have to find a perfect match for their client, according to Risk Placement Services (RPS) in a new report.
“Brokers now need to find the insurers where their clients fit like a puzzle piece into their underwriting appetite, and that is becoming increasingly difficult,” Adam Connor, RPS area senior vice president, noted in the firm’s 2023 U.S. Cyber Market Outlook.
As insurers respond to the changing cyber threat landscape, exclusions are “quickly becoming commonplace in the market.” Insurers are starting to exclude cyber terrorism events and state-backed attacks from coverage, said Zach Kramer, RPS area assistant vice president. They’ve also begun adding exclusions related to infrastructure attacks, and are broadening their definitions of infrastructure. RPS is additionally seeing lower limits on the contingent business interruption elements of a policy.
Insurers, increasingly concerned by systemic risk from widespread use of third-party cloud providers, have started naming major players in policy wording, according to the report.
Kramer warned buyers and brokers to look closely at policy wordings. “A lot of the general mandatory endorsements can appear innocuous at first. But look closer and they can include significant implicants for a policy,” he said.
Increased underwriting sophistication from insurers – with many now adopting techniques such as third-party scans to detect security weaknesses – has helped many organizations become more resilient to cyberattacks.
Better resiliency helps insurers manage their losses and, in turn, “will lead to a slowdown in the premium increases experienced in recent years.” However, increases between 15% and 25% are still common at renewal, noted RPS.
“More prudent limits deployment over the past two years, along with a more disciplined underwriting approach, are contributing to improved loss ratios among many cyber insurers,” said Steve Robinson, area president and national cyber practice leader of RPS. “It is, however, now much rarer to see $10 million limits offered from a single insurer, whereas this used to be commonplace as recently as 2019.”
RPS reported seeing “conflicting approaches” to underwriting in the market. Where one insurer filed an across-the-board 38% rate increase and cut back on exposure to ransomware-related losses, another set “virtually flat” premium expectations for the next few months.
“Last year, every market was taking large rate increases and increasing information security requirements in order to qualify for coverage. This year, we are seeing everything from a continuation of this trend among some markets to a swing in the opposite direction from others,” said Robinson in the report.
