Businesses are treating cyber liability insurance as less of a luxury and more of a necessity as larger numbers of customers are drawn into the market and existing clients seek higher coverage limits, according to Advisen Ltd. surveys.

A global survey of risk managers and insurance buyers undertaken by Advisen and Zurich North America found that the take-up rate for cyber insurance continues to climb, with 78% of respondents having purchased such coverage. More than half of respondents had purchased stand-alone policies, compared with 34% who had bought any kind of cyber coverage in 2011, the first year of the annual survey.

With more claims beginning to roll in, risk managers' responses indicated that clients have been happy with the coverage, said Michelle Chia, head of professional liability and cyber for Zurich North America. Satisfaction with how carriers are responding to breaches and other cyber events "has remained steady and high," Chia said in an interview.

As evidence that cyber threats and corresponding liability have moved to the top of many organizations' risk management strategies, more than 80% of those participating in Advisen's survey indicated that, despite economic difficulties, they did not cut their cyberrisk spend during the COVID-19 pandemic, Chia noted. In fact, most organizations who changed their cyberrisk budgets increased them and are seeking out more insurance.

This could be a result of clients' recognizing that the sudden jump in remote work might heighten their vulnerability to cyber breaches or compromise, she said.

Threat visibility rising

Another survey Advisen conducted with PartnerRe Ltd. shows the growing awareness of cyber threats among insurance buyers. News of breaches and losses, as well as cyber-related losses of their own, are the top reasons companies cite for cyber liability purchases, according to survey results from underwriters and brokers around the world. The number of organizations paralyzed by ransomware attacks has risen sharply over the last two years, as have attackers' dollar demands. That exposure is now the second most in-demand coverage area for new and renewal customers.

The initiative to cover online exposures with insurance is increasingly coming from company boards and senior management, according to survey respondents.

Responses to both surveys signal market winds shifting toward higher prices and tightening terms and conditions after years of modest losses that encouraged underwriters to expand coverage for relatively cheap premiums. Yet aside from the complexity of risk and coverage that still turns away many insurance buyers, price remains one of the top barriers to closing a cyber policy sale. Despite robust demand, those trends appear to be at odds for growth.

This creates an opportunity for smaller insurance companies with technology-enabled agility, according to Cowbell Cyber Inc. CEO Jack Kudale. Cowbell began selling policies in 2020 with its own brand of cyberrisk assessment that continuously gauges vulnerability. Addressing digital risk holistically allows clients to better understand and appreciate what they are buying, Kudale said in an interview.

"Being able to bundle the cyber insurance policy with the risk that you see is crucial to overcome that [pricing barrier] challenge," he said. Half of the companies Cowbell sells to in the small market are new cyber insurance buyers, Kudale said.

Zurich North America has approached the market in a similar fashion, as a "strategic risk management collaborator," Chia said. Her companies do so by partnering with vendors who help monitor risk and train employees to mitigate exposure.

"That is at the core of how we want to help protect companies in managing their cyber risk," Chia said.