Arity claims first insurance partner. PolicyBazaar adds big round. This week in insurance tech.
Following up on last week’s $275M acquisition by Guidewire of cyber risk modeling startup Cyence, we wanted to focus this newsletter on providing some further data points on the cyber insurance market and where we’re seeing startups play in the growing industry.
Cyber assets are significantly underinsured based on value, likelihood of an incident, and probable maximum loss
A chart-filled report released in April 2017 by Aon Risk Solutions and Ponemon Institute found that while companies value their information assets higher than their property, plants & equipment, the latter has significantly more coverage.
But while companies’ exposure to cyber risk is only expected to increase, almost half of companies surveyed said they had no plans to purchase cyber insurance. Despite the importance of cyberattack data in assessing cyber risk, it’s worth noting that 36% of companies said that a material cyber loss does not require disclosure.
The market today
While cyber direct premiums written hit $1.34B in 2016, the top 20 writers accounted for 87% market of share, according to A.M Best. Future premiums are also expected to accrue to a limited number of writers. Overall, cyber insurance was profitable for the majority of large writers in 2016, explained partially by a majority of reported cyber attacks being related to ranosmware (sic) cases where losses were below the deductible.
This is of course subject to change moving forward. “Silent” cyber exposure in traditional commercial insurance products is also a big concern as the market grows.
The small business opportunity
Many also believe there is a tremendous opportunity to sell cyber insurance to small businesses not only because small businesses wouldn’t be able to sustain the financial consequences of a cyber event, but also because of the increased attacks on small businesses over time. A recent study by the Better Business Bureau estimates that 15% of small businesses have cyber insurance.
Where venture-backed startups are focused
Cyber risk management and ratings: When it comes to where startups are playing, we continue to see growth in investment to startups providing risk ratings for cyber insurance – including by insurers.
Just this week, Security Scorecard raised a $27.5M Series C round from investors including AXA Strategic Ventures. Insurance Australia Group previously invested in cybersecurity threat rating startup UpGuard. Meanwhile, MassMutual Ventures and Aetna Ventures have invested in third party risk assessment exchange CyberGRX.
What’s next? The next phase of startups in the space appears to be aiming at bringing novel, tech-driven underwriting to cyber. Rotem Iram, CEO of stealth startup CyberJack, told Insurance Business in July,
“We felt that by building a new insurance company that is essentially built with the DNA of cyber security experts, but leverages the position in the stack of an insurance company, we would be best positioned to solve this issue – better positioned than insurance companies because we have cyber security DNA and better positioned than tech companies because we are taking full ownership over risk.”
We’ll be digging into these startups and much more in a longer analysis of the cyber insurance industry later this fall.