Despite a resurgence in ransomware attacks in 2023, analysts at JP Morgan maintain a positive outlook on the cyber insurance market, citing its attractiveness due to strong profitability and growth potential. Data released by Aon indicates a significant increase in ransomware incidents, particularly affecting sectors like education, professional services, manufacturing, financial services, and technology. However, this increase in cyber threats hasn’t corresponded with a rise in claims frequency, which analysts attribute to effective risk mitigation efforts implemented in previous years.
While ransomware claims have become more prevalent, overall data breach and privacy event levels remain subdued. Even with slight reductions in cyber insurance pricing, JP Morgan highlights that current rates are still significantly higher than in 2020, adequately compensating for the increased risk of ransomware. The cyber market’s combined ratio stood at around 74% in 2022, showcasing its profitability in comparison to other property and casualty (P&C) market segments.
The robustness of the cyber insurance market is further underscored by its underwriting profitability. Even in challenging years, cyber insurance has managed to maintain a profit, with a notably better combined ratio than the average in the P&C market. These findings suggest that despite the uptick in ransomware frequency, the cyber insurance market is well-positioned to absorb these increases, maintaining its strong base of profitability.