[SPEAKER_01]: Welcome to AMBEST audio.
[SPEAKER_01]: premiums generated from cyber insurance coverage declined by two point three percent to slightly less than seven point one billion dollars in twenty twenty four compared with a year earlier marking the first ever decrease in the segment since the U.S.
[SPEAKER_01]: data was first collected in twenty fifteen that according to a new I am best report
[SPEAKER_01]: Despite the drop in premium, the loss ratio for the U.S.
[SPEAKER_01]: cyber segment remain below the fifty percent mark in twenty twenty four.
[SPEAKER_01]: I'm John Weber for I am best TV and I'm joined today by one of the reports authors senior industry analyst Chris Graham who's going to take us behind the segment just a bit Chris so glad you could join us today.
[SPEAKER_01]: Hi John thank you for having me this afternoon so Chris can you explain the significance of the overall premium drop and what's possibly behind it.
[SPEAKER_02]: So this as you said this is the first time since the NAIC began collecting data in twenty fifteen that we've seen a premium drop for cyber insurance and it's what we see going on two different things we were seeing the
[SPEAKER_02]: primary type of cyber insurance those are that are more for the more sophisticated insurance that's where we saw the pricing cuts and that's what's driving the drop in premium that part of the segment is
[SPEAKER_02]: Yeah, it's starting to be a mature segment now where you have ensured to are very well aware of the importance of cyber hygiene.
[SPEAKER_02]: They're on top of everything.
[SPEAKER_02]: So yes, pricing does become a factor for them.
[SPEAKER_02]: And they're going to purchase their insurance.
[SPEAKER_02]: They have a lot of the tools in place.
[SPEAKER_02]: They feel that they can, where they can benefit from, from better pricing now.
[SPEAKER_02]: We also did see some insurance move to captives because their experience was so good.
[SPEAKER_02]: They would start it.
[SPEAKER_02]: We'll putting their own insurance under a captive, which isn't being reported.
[SPEAKER_02]: To that extent, is there a drop in total cyber coverage?
[SPEAKER_02]: No, it's just some of it moved to places that aren't being reported to the NAIC.
[SPEAKER_02]: For the smaller entities, we did see increases.
[SPEAKER_02]: Okay, and this is a, this whole split result is a continuation of what we saw in twenty twenty three and now into twenty twenty four.
[SPEAKER_02]: These smaller entities, there's very little market penetration so far.
[SPEAKER_02]: There's still a lot of entities that are realizing they need cyber insurance.
[SPEAKER_02]: Now, they're typically purchasing it as an endorsement to whatever other policies they have.
[SPEAKER_02]: It's kind of an add-on.
[SPEAKER_02]: It's not a whole lot of money for any one endorsement.
[SPEAKER_02]: But that's why you're not getting, even though that's increasing, you're not getting enough to offset what we saw on the decreases among the sophisticated insurance.
[SPEAKER_01]: How did the cyber insurer perform based on the twenty twenty four results in what were some of the key takeaways there so the
[SPEAKER_02]: The results were still very good.
[SPEAKER_02]: So we did see a loss ratio increase from, from twenty twenty three.
[SPEAKER_02]: That's not a surprise.
[SPEAKER_02]: You have a year of, you know, inflationary impacts, severity trend, you know, is pretty much only going to move one direction up and with premiums coming down.
[SPEAKER_02]: Of course, the loss ratio is going to increase.
[SPEAKER_02]: But it's still very profitable.
[SPEAKER_02]: You're still talking about a wash ratio below fifty percent.
[SPEAKER_02]: Overall, this is, you know, really still the benefit of all the of the hard market from, you know, twenty twenty twenty twenty one and into twenty twenty two, where there were some really steep pricing increases.
[SPEAKER_02]: And yes, we've had some decrease, but not nearly to that level.
[SPEAKER_02]: So you're still looking at premiums that are much higher than they were before the pandemic.
[SPEAKER_02]: And now you, like I said, this is now somewhat of a more mature market where people can balance all that.
[SPEAKER_02]: And the results seem to are holding because the price increases and the cyber hygiene are all there now.
[SPEAKER_01]: The report also notes the role of accessing surplus lines writers.
[SPEAKER_01]: What's the appeal for in us to be placing cyber coverage in that segment?
[SPEAKER_02]: It's really, you know, the demand of the more sophisticated in shorts.
[SPEAKER_02]: This is something, again, we looked at.
[SPEAKER_02]: If you split between those that are buying a primary cyber policy where it's strictly cyber coverage versus those that are buying it endorsement, again, we see different results here.
[SPEAKER_02]: Those that are buying the primary cyber policy, that's where you're getting a bulk of the surplus line's activity.
[SPEAKER_02]: You're talking about sophisticated insurers who have very specific needs.
[SPEAKER_02]: They have some of their own insurance knowledge.
[SPEAKER_02]: They know what they want and the ENS market can tailor the wording, the needs and the limits to meet the insurers needs.
[SPEAKER_02]: on the, you know, the smaller endorsement type policies, they're still buying the, you know, on the admitted paper.
[SPEAKER_02]: They don't, this is a lot of your mainstream businesses or smaller businesses that don't have the insurance knowledge to get something that specific.
[SPEAKER_02]: So it's really the sophisticated and towards your large corporations who are buying the E and S policies.
[SPEAKER_02]: Thanks, Chris.
[SPEAKER_02]: Thanks, John.
[SPEAKER_01]: That was Senior Industry Analyst Christopher Graham.
[SPEAKER_01]: You can find the full report online at AMBEST.com.
[SPEAKER_01]: For AMBEST TV, I'm John Weber.
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