Best’s News & Research Service - May 11, 2021 03:33 PM (EDT)
Best’s Commentary: Colonial Pipeline Attack Throws Spotlight on Cyber Insurance Market
- May 11, 2021 03:33 PM (EDT)
Oldwick //BestWire// - The ransomware attack on one of the largest pipelines in the United States highlights the interconnectedness of cyber risk and the importance of cyber security to all business operations, according to a new AM Best commentary.
AM Best states in its Best’s Commentary, “Colonial Pipeline Attack Throws Spotlight on Cyber Insurance Market,” that premiums for standalone cyber policies grew more than 28% in 2020, reflecting price increases and a move by the insurance industry to get more clarity on their cyber underwriting factors. While premiums in the $2.7 billion U.S. cyber insurance market have seen healthy growth in recent years, an even greater increase in claims has overshadowed market growth. From 2017 to 2020, according to the commentary, annual premium grew at an average of 19%; however, claims grew by 38%, reflecting a steady increase in the sophistication of criminals’ ability to penetrate and disable networks. The Colonial Pipeline attack, which shut down 5,500 miles of pipeline between Texas and New Jersey, is a manifestation of this growing sophistication and many insurers are now realizing the significant risks inherent in this line of business.
“As the Colonial Pipeline attack has shown, cyber is a very complex risk, with far-reaching impacts to clients and insurers alike,” said Sridhar Manyem, director of industry research and analytics. “The classifications of these events as terrorism, criminal activity or acts of war have different implications for insurance, and will require guidance from government entities as clients and insurers navigate these cases.”
The escalation in ransomware attacks also has forced insurers to re-think globally, as evidenced by the decision of AXA Insurance in France to halt ransomware crime reimbursements. Insurers that lack the appropriate expertise, ability and controls for cyber insurance risks could be subject to losses outside of risk tolerance that may have ratings implications.
To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=308540 .
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.