Opportunities to Revitalize Growth in the US Cyber...

Opportunities to Revitalize Growth in the US Cyber Insurance Market, TMHCC report reveals

• Following triple digit growth between 2020-2022, in 2023 the U.S cybermarket's overall growth rate was only 1.6%
• Premium rate change in the U.S cyber insurance market has fallen to below zero, marking the onset of a soft market
• Rise of extortion activity has led to the number of reported data breaches skyrocketing, with 2023 reaching 3.2k incidents, the highest since records began
• Tokio Marine US PC Grp becomes fifth largest underwriter of US cyber risks increasing DPW to $377.9m in 2023 and provides cover for more than 5% of the market

Houston, TX - (December 18, 2024) - Tokio Marine HCC - Cyber & Professional Lines Group (CPLG), a member of the Tokio Marine HCC group of companies based in Houston, Texas has today published its annual 2024 Cyber Market Report. The report explores the evolving landscape of the US cyber market, uncovering areas for growth, assessing loss trends, and addressing the attack method deployed by ransomware groups. The report also outlines the composition of the market, with Tokio Marine US Property & Casualty Group increasing DPW in the US cyber market to $377.9m and retaining 5.2% of the market¹.

The US cyber insurance market is undergoing a pivotal transformation. Following triple digit growth in the 2020 to 2022 period, the landscape shifted in 2023 and US overall market growth declined to just 1.6%².

Alongside this, there has been a notable rise in cyber extortion activity, and threat actor groups have turned to more aggressive tactics and high value targets.

Adjusting Rates and Evolving Opportunities for Policyholder Growth

The stagnation in market growth observed in 2023 can be attributed to a combination of decreasing premium rates and limited growth in policy count.

Even during the hard market at the start of the decade, premiums drove growth in the overall market. Policy count increases remained very modest, growing by 10% between 2020 and 2023. During the same period, premiums grew by over 142%^2,3.

In 2024, premium rate change in the US cyber insurance market has fallen to below zero, marking the onset of a soft market.

While premium growth stagnated, so did loss ratios, with a 3-point reduction in cyber market loss ratio to 41.6%.

However, deeper analysis of the National Association of Insurance Commissioners (NAIC) data uncovers some significant discrepancies in loss reporting, casting doubt on the initial outlook. The reported 35.5% "loss ratio" for package policies in 2023 is likely understated and could be over 50% on an ultimate loss basis.

2023 a record year for extortion

The report found that extortion activity likely reached an all-time high in 2023. Leak sites, which have become a very strong indicator of activity levels in the market, show a massive uptick in leak site victims, reaching 4,496 in 2023, up from 2,670 the year prior. Malicious attackers continue to be the primary cause of data breaches, with only a quarter of these incidents stemming from system failure or human error in 2023.

In addition to the increase in extortion activity the time to resolve extortion claims has increased as a result of double-extortion attacks which have become the norm. Litigation in the aftermath of extortion attacks and the prevalence of business income loss have driven cyber loss maturation back to a medium tail timeline, reflecting the extended periods required to fully resolve claims.

Jacob Ingerslev, Senior Vice President, Cyber & Tech Underwriting at CPLG: As the U.S. cyber insurance market enters a pivotal phase, it is clear that this is not just a period of stabilization but a moment requiring strategic adaptation and innovation. While hard market growth was fueled by rapid premium increases, the softening market of 2023-2024 signals that pricing alone can no longer drive expansion. The future will depend on attracting new policyholders, portfolio diversification and working even more closely with policyholders to address increasingly sophisticated cyber threats. The long-term success of the cyber insurance market hinges on its ability to balance profitability with robust risk management, adapt to regulatory changes, and create a greater cybersecurity investment.

For more information, the full 2024 Cyber Market Report can be read here: 2024 CPLG Cyber Market Report

END

Notes to the editor

References

¹"US Cyber: Hot Pricing Cools Off, Rapid Growth Stalls," June 24, 2024, AM Best Market Segment, Copyright 2024 by AM Best 2024

²"Global Cyber Insurance," June 24, 2024, AM Best Market Segment, Copyright 2024 by AM Best

³Report on the Cybersecurity Insurance Market. National Association of Insurance Commissioners, Nov. 2023

⁴The National Association of Insurance Commissioners collects premium, policy count and loss data from US Insurers. Source: NAIC 2024.

⁵Chainalysis Team. "Ransomware Hit $1 Billion in 2023." Chainalysis, 7 Feb. 2024, www.chainalysis.com/blog/ransomware-2024/.

About Tokio Marine HCC - Cyber & Professional Lines Group
Tokio Marine HCC - Cyber & Professional Lines Group, doing business as NAS Insurance Services, LLC with the CA license #0677191, is headquartered in Encino, CA and is a member of the Tokio Marine HCC group of companies based in Houston, Texas. For more information about Tokio Marine HCC - Cyber & Professional Lines Group, please visit www.tmhcc.com/pro.

About Tokio Marine HCC
Tokio Marine HCC is a member of the Tokio Marine Group, a premier global company founded in 1879 with a market capitalization of $73 billion as of June 30, 2024. Headquartered in Houston, Texas, Tokio Marine HCC is a leading specialty insurance group with offices in the United States, Mexico, the United Kingdom and Continental Europe. Tokio Marine HCC's major domestic insurance companies have financial strength ratings of 'A+' (Strong) from S&P Global Ratings, 'A++' (Superior) from A.M. Best, and 'AA-' (Very Strong) from Fitch Ratings; its major international insurance companies have financial strength ratings of 'A+' (Strong) from S&P Global Ratings. Tokio Marine HCC is the marketing name used to describe the affiliated companies under the common ownership of HCC Insurance Holdings, Inc., a Delaware-incorporated insurance holding company. For more information about Tokio Marine HCC, please visit www.tokiomarinehcc.com.

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Desiree Khoury
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