Cyber Insurance Market

Part
01
of six
Part
01

Cyber Insurance - Market Size

In determining the US cyber insurance market size, your research team was able to find that currently it is worth approximately $5.5 billion. These findings, plus the calculations used to arrive at this figure are summarized below.

SUMMARY

RESEARCH STRATEGY

In finding the market size for the US, we first did a straightforward search for a direct answer. We found a source that only mentioned the US market size in 2015. However, in this search results came up about the global market, and what it would be by 2025. We searched some more but we were unable to find a direct answer through this strategy, hence we changed strategy.

In our next strategy we looked for a global market size with CAGR. We did this in the hopes of deriving the US figure, and then using the CAGR of the global market to calculate what it would be for the US. Since the US market formed such a large percentage of the global market, and the CAGR remained relatively steady from 2015, we determined that it was safe to assume the US's growth should be the one driving global growth, and should be in lockstep with global growth.

With this in mind, we found what the global market was worth in 2015 and also in 2017, hence we found what the growth was over those two years. We used an online calculator to find that the CAGR was 39.46%, and with this we found that the US's market value in 2017 was $5.5 billion. Since we already had the CAGR from 2017 to 2025, and using the same assumption that the US's growth would be in lockstep with global growth, we used this to calculate what the US market would be in late 2019. We used the online calculator again and found that it is $5.5 billion. We believe that this follow the trend as seen by PwC, where they calculate that the global market size by 2020 will be $7.5 billion.

Part
02
of six
Part
02

Cyber Insurance - Growth Rate

During the period 2014-2018, the United States cyber insurance market grew at a compound annual growth rate (CAGR) of around 20.51% to 26.79%. The same market is expected to grow at an estimated CAGR of 10.27% during the period 2019-2023.

HISTORICAL GROWTH RATE

  • The bar chart provided by Grand View Research, a market research firm based in San Francisco, suggests that (a) the cyber insurance market in the United States grew at a CAGR of 20.51% during the period 2014-2018 and that (b) the yearly size of the cyber insurance market in the country during the same period was as follows:
    • 2014: $1.24 billion
    • 2015: $1.50 billion
    • 2016: $1.81 billion
    • 2017: $2.18 billion
    • 2018: $2.625 billion
  • The figures provided by Aon, "a leading global professional services firm providing a broad range of risk, retirement and health solutions," indicate that (a) the cyber insurance market in the United States grew at a CAGR of 26.62% during the period 2015-2018 and that (b) the yearly size of the cyber insurance market in the country during the same period and the year-on-year growth rates were as follows:
  • The figures provided by A.M. Best, a leading ratings provider in the insurance space, indicate that (a) the cyber insurance market in the United States grew at a CAGR of 26.79% during the period 2015-2018 and that (b) the yearly size of the cyber insurance market in the country during the same period and the year-on-year growth rates were as follows:

CURRENT/PROJECTED GROWTH RATE

  • The bar chart provided by Grand View Research suggests that (a) the cyber insurance market in the United States is projected to grow at a CAGR of 10.27% during the period 2019-2023 and that (b) the yearly size of the cyber insurance market in the country is projected to grow in the following manner:
    • 2019: $2.875 billion
    • 2020: $3.17 billion
    • 2021: $3.50 billion
    • 2022: $3.85 billion
    • 2023: $4.25 billion
  • The drop in CAGR is consistent with the recent observation of Fitch Ratings, a key credit market data provider. According to Fitch Ratings, the United States cyber insurance market continues to grow, but growth in the market is slowing. Cyber coverage take-up rates have slowed down.
  • Market growth is being driven by the following factors: high-profile cyber attacks or events, the desire of companies for more advanced risk management, and improved pricing.

RESEARCH STRATEGY

We understand that our research team earlier reported that based on their triangulation, the current size of the United States cyber insurance market, expressed in direct premiums written, is around $5.5 billion. However, a number of authoritative sources have published information that contradicts this finding. Market research firm Grand View Research, professional services firm Aon, ratings provider A.M. Best, and credit market data provider Fitch Ratings either suggest or readily indicate that the current market size is somewhere between $2 billion and $3 billion. It is for this reason that we decided to disregard the previously computed amount of $5.5 billion.

To compute the market's CAGR in the past five years, we referred to the reports of Grand View Research, Aon, and A.M. Best. Grand View Research has published a bar chart showing the historical and projected size of the United States cyber insurance market. Though most of the actual values are not displayed, the two available data points and the bar heights were enough for us to compute the historical and current/projected growth rates. By measuring the bar heights and by using the concept of ratio and proportion, we were able to perform the following calculations. The resulting CAGR was verified through the use of a CAGR calculator. As it is not wise to use a separate source just for the 2014 market size for reasons relating to data consistency, we assumed that the CAGR during the period 2015-2018 is more or less the same as the CAGR during the period 2014-2018. We felt it is safe to make this assumption considering that market sizes, in most cases, do not drastically change from one year to another.

Historical
---
2015: $1.50 billion
2018: ($1.50 billion x 21 mm)/12 mm = $2.625 billion

CAGR (2015-2018): ((($2.625 billion/$1.50 billion)^(1/3))-1) x 100% = 20.51%

2014: $1.50 billion/1.2051 = $1.24 billion
2015: $1.50 billion
2016: $1.50 billion x 1.2051 = $1.81 billion
2017: $1.50 billion x (1.2051^2) = $2.18 billion
2018: $1.50 billion x (1.2051^3) = $2.625 billion

Current and Projected
---
2019: ($1.50 billion x 23 mm)/12 mm = $2.875 billion
2023: ($1.50 billion x 34 mm)/12 mm = $4.25 billion

CAGR (2019-2023): ((($4.25 billion/$2.875 billion)^(1/4))-1) x 100% = 10.27%

2019: $2.875 billion
2020: $2.875 billion x 1.1027 = $3.17 billion
2021: $2.875 billion x (1.1027^2) =$3.50 billion
2022: $2.875 billion x (1.1027^3) =$3.85 billion
2023: $2.875 billion x (1.1027^4) =$4.25 billion

Aon, on the other hand, has published a report showing the yearly size of the United States cyber insurance market during the period 2015-2018. Given these historical market sizes, we were able to compute the market's CAGR during the period 2015-2018 and the market's year-on-year growth rate in years 2016, 2017, and 2018.

2015: $1.00 billion
2016: $1.35 billion (+35% year-on-year growth)
2017: $1.84 billion (+36% year-on-year growth)
2018: $2.03 billion (+10% year-on-year growth)

CAGR (2015-2018): ((($2.03 billion/$1.00 billion)^(1/3))-1) x 100% = 26.62%

A.M. Best has also published a report showing the yearly size of the United States cyber insurance market during the period 2015-2018. Again, given these historical market sizes, we were able to compute the market's CAGR during the period 2015-2018 and the market's year-on-year growth rate in years 2016, 2017, and 2018.

2016: $1.353 billion (+36% year-on-year growth)
2017: $1.803 billion (+33% year-on-year growth)
2018: $2.030 billion (+13% year-on-year growth)

CAGR (2015-2018): ((($2.030 billion/$0.996 billion)^(1/3))-1) x 100% = 26.79%

All market sizes are expressed in terms of direct premiums written.
Part
03
of six
Part
03

Cyber Insurance - Major Players

The five major players in the cyber insurance market in the US in terms of the US cyber insurance market share include Chubb, AXA US, American International Group (AIG), Travelers Insurance, and Beazley.

CYBER INSURANCE MAJOR PLAYERS

Chubb

AXA US

American International Group (AIG)

Travelers Insurance

Beazley Group

Research Strategy

The team started our search by going through industry reports and cyber insurance market analysis available in the public domain on the top cyber insurers in the United States. We found a report by Insurance Journal which detailed the major players in the US cyber insurance space in terms of market share. We went ahead to find some corroborating sources from CyberPolicy and MSSP Alert, which provided similar data and trend. We were able to establish that these industry players were the top and held the most significant market shares. A further search was done to ensure that the listed companies were all of US origin. The search also determined each company website, cyber insurance offerings, and median premium. Unfortunately, we were unable to find the median premium of these top industry players. We have followed the below steps to ensure due diligence was done in an attempt to find this information.

In order to find the cyber insurance median premium of the listed companies, we started by conducting a thorough search through the company website for any information regarding this. We looked at press releases by the various companies', fact sheets, annual reports, case studies, and testimonies by trusted customers, news articles, and reviews. None of the sections of the individual companies' website published any information about their cyber insurance median premium price.

We then decided to look into other sources available in the public domain such as industry reports, trusted media sources, publications, and the cyber industry market analysis. None of these sources contained the median premium cost of the listed companies. We expanded our scope to contain third-party review sources, US cyber insurance monitoring agencies, and other related analysis of the cyber industry in the United States. This step was futile as none of the sources we searched contained any information on median premium cost.

Lastly, we decided to expand our search to publications and reports of the global cyber industry market analysis to know if such information was mentioned in these reports but to no avail. We also looked at the various post-social media handles of the listed companies and also promotions and ads by these companies with the hope that they might have published such information, but none of these steps worked. We came to a conclusion that since the median premium cost can be used to estimate the minimum and maximum cyber insurance offerings of the insurance providers which can reveal to clients an idea of the financial capacity of such company, this information is instead kept away from the public domain as its vital and can be used against by competitors.
Part
04
of six
Part
04

Cyber Insurance - Nature of the Market

The United States cyber insurance industry is highly consolidated, however, based on the changing position of the key players over the years, it is fairly dynamic. Only three out of the top five cyber insurance companies in 2015 remain in the top five list of 2018, based on the total direct premium written.

MARKET SHARE DYNAMISM

  • In 2015, the top 10 players in the United States cyber insurance market generated 78.7% of the total direct premium written (DPW), while the top 20 players generated 95.8%.
  • The top 10 players in the United States cyber insurance market generated 68.7% of all DPW in 2016, while the top 20 wrote 84.4% of the market.
  • In 2017, the top 10 companies in the United States cyber insurance market wrote 79.9% of the total DPW, while the top 20 wrote 93.2% of the market.
  • The top 10 players in the United States cyber insurance market generated 69.5% of all DPW in 2018, while the top 20 wrote 85.5% of the market.
  • Only four companies that were ranked among the top 20 companies in 2017 did not make it into the 2018 list based on the total direct premium they generated. These companies were ranked 15th, 17th, 19th, and 20th in 2017. (Deduced from the ranking in this report)
  • Of the companies that made the 2018 top list based on total DPW, 10 companies improved their ranking, seven remained in the same position, while only three were demoted from their previous ranking in 2017. (Deduced from the ranking in this report)

KEY PLAYER TIERS

  • Most reports and analysis on the United States cyber insurance market typically segment the players into the top five, top ten, and top twenty (here, here, and here). The first year data was compiled on the market by the National Association of Insurance Commissioners (NAIC)
  • Only three out of the top five cyber insurance companies in 2015 remain in the top five list of 2018, based on the total DPW.
  • Also, only five out of the top ten cyber insurance companies in 2015 remain in the top 10 list of 2018, based on the total DPW.

CONCLUSION

From the above findings we have made some logical conclusions and deductions. The market is very consolidated considering only a few companies control a large portion of the industry. While the share of the top 20 players in the industry has reduced from 95.8% in 2015 to 85.5% in 2018, the market remains highly consolidated, although this reduction reflects a growing competitive landscape. The fact that five out of the companies that were in the top ten list three years ago (2015-2018) are no longer there suggests that the position of the key players in the market is fairly dynamic. Four of the top in 2015 are still part of the top ten in 2018. Also, 16 out of 20 companies being in the top 20 list of 2017 and retain their place in the 2018 list speaks of the consolidation in the market. In conclusion, the United States cyber insurance industry is highly consolidated, however, based on the changing position of the key players over the years, it is fairly dynamic


Part
05
of six
Part
05

Cyber Insurance - Trends

Some trends in the cyber insurance market in the United States include the growth of the entire cyber insurance market, growth of standalone cyber insurance premiums, desire for sophisticated cyber risk management, further market expansion opportunities, the concentration of the cyber insurance market, and limited availability of claims data.

GROWTH OF THE CYBER INSURANCE MARKET

  • The United States cyber insurance market was $2.5 billion in 2016 and is expected to grow to $6.2 billion by 2020.
  • According to MarketWatch, North America has dominated the cyber insurance market and represented about 89% of the global cyber insurance market as of 2016. Mandatory legislation on cybersecurity across several regions in the United States is driving an increase in the penetration of cyber insurance policies.
  • Companies driving the growth of the United States cyber insurance market include the American International Group, Inc., the Chubb Corporation, Berkshire Hathaway, and Lockton Companies, Inc.
  • According to Chubb, its cyber insurance sector produced a "double-digit growth" throughout 2017, achieving an annual "run rate of over $1 billion" in the form of premium. Chubb is determined to protect its cyber insurance business and plans to exceed several billion dollars with time.
  • Chubb's revenue for the quarter, which ended June 30, 2019, was $8.527illion, representing a year-over-year increase of 0.2%.
  • The year 2019 is considered to be the year of cybersecurity investments. According to TD Ameritrade’s annual survey conducted among registered investment advisors (RIAs), there is a six times jump in the number of cybersecurity investments in 2019 when compared to 2018. The number of companies interested in cybersecurity investments grew from 11% in 2018 to 59% in 2019.

GROWTH OF CYBER INSURANCE PREMIUM EARNINGS

  • United States cyber insurance premiums grew by 37% in 2017 and 8% in 2018 to reach $2 billion.
  • Within four years, cyber insurance premiums written across the United States have more than doubled from $996 million in 2015 to $2.0 billion in 2018.
  • Chubb Ltd is one of the significant players in the United States cyber insurance market. Chubb Ltd wrote premiums worth $133,599,000 in 2016, and $316,253,000 in 2017.
  • Like with other forms of insurance, companies subscribing to cybersecurity policies are required to pay a premium fee to be covered should something terrible, such as a data breach, occur.
  • The global average financial cost/implication of a data breach is $3.9 million. The typical cost is much higher for some industries and locations such as the United States. As the instances of data breaches continue to increase, organizations have realized that the costs associated with cybersecurity are "not theoretical."
  • Information credited to the National Association of Insurance Commissioners and the Center for Insurance Policy and Research reveals that over 500 companies wrote cyber-related insurance policies in 2017. The total direct written premiums were $1.89 billion for both package and stand-alone policies.

SOPHISTICATED CYBER RISK MANAGEMENT

  • Several new as well as evolving cybersecurity threats have kept the "information security industry on high alert." Sophisticated cyberattacks using malware, machine learning, artificial intelligence, phishing, cryptocurrency, etc., are increasing. The data and assets of corporations, individuals, and governments at constant risk.
  • Experts believe that as human dependence on communication technology continues to increase, cybersecurity will get become more important. This scenario would lead to a heightened desire for sophisticated cyber risk management.
  • Experts also reveal that cyber phishing, ransomware strategies, crypto-jacking, cyber-physical attacks, state-sponsored attacks, third party attacks, is on the rise in 2019.
  • According to Phoenix Nap Global securities, AI-based analysis related to behavioral biometrics will become a significant trend in cybersecurity as well as data protection for 2019. Sophisticated machine learning computations/ algorithms would be used to build up a user’s typical profiles and behavior to identify the unusual pattern of activities. This would be used to highlight potential real-time threats before they occur.
  • Companies will employ an automatic process to detect suspicious data. The entire security process will become more efficient by removing the requirement for meticulous manual data log reviews.

MARKET EXPANSION OPPORTUNITIES/INCREASED DEMAND

  • Chubb, a cyber insurance service provider, reveals that system exposure to cybersecurity threats is growing. This growth is "as a result of a digitized world" as businesses and individuals continue to demand cyber insurance.
  • The number of items connected to the internet of things (IoT) such as laptops, tablets, routers, webcams, household appliances, medical devices, smartwatches, manufacturing equipment, automobiles, and home security systems would reach about 31 billion by 2020. About 90% of new cars would also be connected to the internet by 2020. For hackers, such evolution presents yet additional opportunities for exploitation of vulnerabilities in insecure systems to steal sensitive information.
  • An increase in the vulnerabilities of insecure systems which present exploitation opportunities for hackers would also present market expansion opportunities for cyber insurance companies.
  • Chubb recently reached a strategic partnership agreement with PICC Property and Causality Company, China. Apart from local services, Chubb’s intends to expand its market by using its capabilities to support PICC’s customers and its affiliated companies across the world.

CONCENTRATION OF THE CYBER INSURANCE MARKET

INCREASED COMPETITION/MORE COVERAGE FOR PREMIUMS

  • As the United States cyber insurance market continues to grow, competition is increasing. Currently, just five insurers control 60% of United States cyber insurance premiums. However, new entrants have accessed the market within the last two years, and there are over 140 insurers currently reporting cyber premiums.
  • Due to the competitive nature of the cyber insurance markets, buyers are "getting more for" paid premiums. Experts believe that this trend may not last.
  • The limited availability of historical claims data presents challenges for new entrants/competitors in the cyber insurance sector. This lack of data brings these companies face to face with tremendous uncertainty. It is difficult for entrants to measure the risk factors of potential cyber events, starting from attacks to energy infrastructure to cloud or ransomware attacks.
  • Due to rising competition, the overall direct cyber insurance loss ratio decreased from 51.4% in 2015 to 46.9% in 2016.
  • To survive a competitive local market, Chubb recently went into a strategic partnership with PICC Property and Causality Company, China. Apart from offering local services across America, Chubb has expanded its market share by using its capabilities to support PICC’s customers and affiliated companies all over the world.

RESEARCH STRATEGY

Our research team investigated market resources (e.g., MarketWatch), credible media publications, and academic studies. Insurance Journal, MarketWatch, etc., published several trends such as the growth of the United States cyber insurance market size, the concentration of the market, etc. We ensured that included trends appear across a plethora of resources. We also investigated how some companies are being affected by the highlighted trends.
Part
06
of six
Part
06

Cyber Insurance - Tools

Seven types of tools used in the cyber insurance industry include BitSight for Insurance, Prevalent Third-Party Cyber & Business Risk Monitoring Service, RedSeal’s cyber risk modeling platform, Cyence for Cyber Risk Management, SecurityScorecard, Bay Dynamics Risk Fabric, and UpGuard VendorRisk.

BITSIGHT FOR INSURANCE

  • Here is the website of BitSight for Insurance.
  • The unique features of BitSight for Insurance include security ratings for underwriting, pricing and loss control, and management of portfolio risk.
  • Its pricing starts from $20,000 per year.

PREVALENT THIRD-PARTY CYBER & BUSINESS RISK MONITORING SERVICE

  • Here is the website of Prevalent Third-Party Cyber & Business Risk Monitoring Service.
  • Its unique features include AI-powered media analytics, vendor risk scale, customizable rules & weights for risk relevance, stakeholder-specific reporting, integrated vendor monitoring, and survey scores.

REDSEAL’S CYBER RISK MODELING PLATFORM

  • Here is the website of RedSeal’s cyber risk modeling platform.
  • Its unique features include application level policies, endpoint information modeling, and Digital Resilience Score, and mapping of Layer 2 environments.
  • Its pricing starts from $1000 for each managed network device.

CYENCE FOR CYBER RISK MANAGEMENT

  • Here is the website of Cyence for Cyber Risk Management.
  • Its unique features include risk prospecting, risk selection, risk assessment, portfolio analysis, aggregation analysis, and exposure modeling.

SECURITYSCORECARD

  • Here is the website of SecurityScorecard.
  • Its unique features include risk assessment, security ratings, innovative benchmarking tools, continuously monitoring of the security posture of partners, and tracking of policyholder changes.
  • It costs $16,500 for a self-assessment and five slots.

BAY DYNAMICS RISK FABRIC

UPGUARD VENDORRISK

  • Its unique features include instant vendor search, security performance tracking, cyber security ratings, automated security questionnaires, and prioritization of remediation risks.
  • UpGuard VendorRisk has three pricing plans. Instant Report ($179), Self-Managed ($29), and Managed Service ($99).

RESEARCH STRATEGY

We found a list of cyber insurance startups on CB Insights and we explored the website of the companies for their cyber insurance tools. To search for the associated costs of the cyber insurance tools, we first searched through the websites of the companies. However, only UpGuard provided information on its pricing.

Next, we scoured through credible news media and cybersecurity news sites hoping to find news reports and articles about cyber insurance companies and tools with pricing information. We explored sites like Forbes, CNBC, PR Newswire, Business Wire, and SC Magazine. We were able to find pricing information for some of them. We then searched through software review sites such as Gartner, G2 Crowd, FitSmallBusiness, and Capterra. They only confirmed that the companies do not provide their pricing information. We could not find any publicly available pricing information for Prevalent Third-Party Cyber & Business Risk Monitoring Service, Cyence for Cyber Risk Management, and Bay Dynamics Risk Fabric.
Sources
Sources