Insurance underwriters are storied for their analytical and extremely methodical use of data to measure risk and write policies accordingly. This works well in insurance markets such as car or home insurance, for which actuarial tables exist based on risk data that goes back for decades or longer.
But when an insurance company seeks to cover a fast-changing risk environment for which very little long-standing data exists, a lot of that actuarial science becomes more like a guessing game.
Guessing Game
This is where we’re at with cyber-insurance underwriting today.
As a result, the last couple of years have been a wild ride for the cyber-insurance market as insurers have grappled with a very real profitability gap. After a decade of steering headlong into a lucrative cyber market that seemed to be minting money for insurance companies, insurers and their policyholders have crashed into a wall of ransomware and costly breaches.
Now a reckoning has come. Facing mounting loss ratios, insurance companies are scrambling to rationalize their cyber insurance portfolios. They started a couple of years ago with huge spikes in cyber insurance premiums. They’ve stabilized those increases…
