Cyber troubles worsened in Q2 2021, with the average premium price increase for that line coming in at 25.5%, up from 18% in Q1 2021, and surpassing the recorded 17.4% increase for Umbrella, the previously most troubled line, by a significant amount. Respondents attributed the rapid increase of Cyber premiums to a rise in ransomware and social engineering attacks, as well as the increased cost of claims due to litigation.
“Carriers continued to approach writing Cyber risk with caution in Q2 2021,” said Ken A. Crerar, President/CEO of The Council. “The rapid increase in ransomware attacks highlighted the need for brokers to work with clients to develop and practice robust risk management strategies to confront the growing threat. In a world where costly cyberattacks are becoming the norm rather than the exception, the broker is in a unique position to help clients identify vulnerabilities, find coverage and protect their firms.”
Underwriting capacity continued to contract for Cyber and Umbrella, with more than 80% of respondents noting a decrease in capacity for Cyber and 73% reporting a decrease in capacity for Umbrella. “The most significant change in underwriting award goes to Cyber this quarter,” said one respondent from a large Northwestern firm, encapsulating the slashed limits, and increased retentions respondents said they encountered for Cyber. Respondents also noted that carriers were much stricter when it came to insured risk management protocols, requiring things like multi-factor authentication and “air gapped” system backups (i.e. system backups kept physically isolated from the rest of a firm’s network), and imposing much higher premium increases should an insured’s risk management strategies be found insufficient.
Brokers emphasized that adapting to and adopting new technologies to meet the needs of their clients would be crucial to growth in the coming years. This included being more open to employees working remotely from different geographies, demonstrating the shift in attitudes towards remote work. Overall, “Brokers need to remain strong advocates for their clients by telling both the underwriters AND the clients the harsh realities of the day,” said one respondent from a large Northeastern firm. “We need to pursue new products that may be more tailored to specific client needs and be ready to create bespoke policies and procedures to respond to these needs.”