Claims frequency and severity grew substantially between 2019 and 2020, outpacing cyber insurance premium growth

Amrae has published its first study on cyber risk and insurance coverage, based on anonymised data submitted by eight major brokers.

The project’s aim is to gage the penetration of the French cyber insurance market and support its growth while highlighting some of the challenges currently facing the cyber risk space.

Among the findings of the LUCY survey (LUmière sur la CYberassurance) is the fact that the highest penetration is among large corporates. Eight-seven percent have cyber insurance in place, versus just eight percent of mid-sized companies. Despite a very real exposure, public authorities are largely underinsured.

Claims frequency and severity grew substantially between 2019 and 2020, outpacing cyber insurance premium growth. While premiums grew from €87 million in 2019 to €130 million in 2020, an 49% increased in volume, there was a threefold growth in claims volume, from € 73 million in 2019 to € 217 million in 2020.

However, the claims inflation is mainly due to four large claims (worth between €10 million and €40 million each).

While 87% of large companies have taken out cyber insurance, cover is too limited (with just €38 million of protection on average) compared to their exposure.

Insureds need access to larger limits, but carriers remain reluctant to offer more capacity due to the worsening claims experience.

”Demand must increase for supply to be sufficient. Or the supply must sufficient to generate demand … There is an urgent need to break out of this vicious circle,” concludes the risk association.

Addressing underinsurance within the mid-cap and SME space, Amrae notes that cyber insurance capacity is readily available for organisations in this category but that ”the real challenge is to raise awareness” of cyber risk.

It points out that in 2019, insurers paid out over €40 million in claims to SMEs and mid-sized firms and notes, ”The current lack of protection is a threat to the French economy”.

The Amrae study was led by Philippe Cotelle, administrator and chairman of the Information Systems committee of Amrae, vice-chairman of FERMA and risk manager of Airbus Defense & Space.