The holiday cyber-attack against Target may have been a nightmare for the retailer, but it was a dream come true for insurance industry professionals. After pitching the value of cyber liability insurance for years, businesses large and small began to heed the call of carriers and producers to get covered.
The high-profile hack was, according to Randy Maniloff of industry law firm White & Williams, “the equivalent of 10 free Super Bowl ads” for insurers and agents.
And now businesses across all industry sectors are starting to scoop up cyber liability insurance. A benchmarking report from Marsh Global Analytics revealed the number of cyber liability clients increased across all sectors by an average 21% last year.
“All industries are growth markets now,” said Michael Palotay, vice president of NAS Insurance in Encino, Calif. “We have gone from something like 20% of insureds buying cyber a couple of years ago to closer to 40% today—and these are insureds with an obvious exposure. We’re still early on in a very young marketplace.”
Yet in the widespread growth, a few industries are leading the pack in terms of purchasing patterns. According to the Marsh report, these six industries showed the most growth last year and will continue to flourish in 2014.
The numbers give a clear directive to independent agents and brokers looking to grow their cyber business: identify new or existing clients in these six sectors and start pitching.
Despite the high increase in product uptake, however, there is some volatility in the market agents should be aware of. The retail industry, for example, faces declining limits in the post-Target breach market.
According to industry reports, carriers are scaling back their cyber risk capacity from an average $300 million before the breach to about $200 million to $250 million currently--a roughly $100 million decrease in less than months.
Palotay said the industry response was to be expected.
“People have less appetite for retailers in general. We’re trying to reduce our exposure across the board to retailers,” he noted. “We’re increasing our rates and we’re managing our limits.”
At the same time, increased regulation signals full steam ahead in the technology service provider industry. Greater contractual requirements as well as self-actualization has led to record highs for New York-based brokerage Cyber Data-Risk Partners.
“While I have a broad and very diverse range of clients, as of late I am getting many more inquiries from technology service providers, especially those in healthcare,” observed brokerage owner Christine Marciano. “Some are being required by contract to purchase the insurance for contractual indemnification and others realize that they need insurance coverage in place to protect themselves when the inevitable occurs."
Palotay says the industry is still young. With less than 50% market penetration, there is still a long way to go. Eventually, however, the cyber insurance market will begin to harden and products will be easier to navigate for clients in all business sectors.
“Once the flood of new buyers slows down, I think there will be some rate pressure as various markets start to compete to grow their share,” he said. “I also think the product will come a long way in the next five years—the market will figure out what resonates most with buyers and coverages will start to get a little more uniform.”