The Government Accountability Office (“GOA” or the “Congressional Watchdog”) has issued a report that describes (1) key trends in the current market for cyber insurance, and (2) identifies challenges faced by the cyber insurance market and options to address them.
The National Defense Authorization Act for Fiscal Year 2021 includes a provision for the GAO to study the U.S. cyber insurance market because malicious cyber activity poses significant risk to the federal government and the nation’s businesses and critical infrastructure, and it costs the U.S. billions of dollars each year.
The recently issued twenty-six-page report is based on the GAO’s analysis of industry data on cyber insurance policies; its review of reports on cyber risk and cyber insurance from researchers, think tanks, and the insurance industry; and interviews with Treasury officials, insurance industry associations representing cyber insurance providers, and other related interested parties found in the present market for cyber insurance that the key trends were:
- Increasing take-up. Data from a global insurance broker indicate its clients’ take-up rate (proportion of existing clients electing coverage) for cyber insurance rose from 26 percent in 2016 to 47 percent in 2020 (see figure).
- Price increases. Industry sources said higher prices have coincided with increased demand and higher insurer costs from more frequent and severe cyberattacks. In a recent survey of insurance brokers, more than half of respondents’ clients saw prices go up 10–30 percent in late 2020.
- Lower coverage limits. Industry representatives told GAO the growing number of cyberattacks led insurers to reduce coverage limits for some industry sectors, such as healthcare and education.
- Cyber-specific policies. Insurers increasingly have offered policies specific to cyber risk, rather than including that risk in packages with other coverage. This shift reflects a desire for more clarity on what is covered and for higher cyber-specific coverage limits.
Agency Checklists highly recommends that anyone interested in a simple graphic presentation of issues concerning cyber insurance, review the free report from the GOA by clicking on the image below.
