Cyber insurers will report a substantial improvement in loss ratios by 2022, based on preliminary data, a rating agency report published Tuesday said.
Toronto-based Morningstar said in its cyber insurance report that loss ratios increased significantly from 2018 to 2020, resulting in higher rates and a tighter market before improving slightly in 2021.
It predicts that as the market grows and matures, insurers will evolve to gather enough data and claims experience to become more comfortable evaluating risk, which could result in increased price stability and loss ratios for the sector, provided they can handle cyber attacks. “increasingly sophisticated and innovative nature.”
;Cyber risk “can be vulnerable to mispricing given that losses can fluctuate widely and in some cases can be extremely high,” the report warns.
It also says that while the availability and affordability of reinsurance may limit its growth, cyber insurers can benefit from high demand uncorrelated with severe weather events, as well as the opportunity to deepen their relationships with policyholders.
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