E&O and Cyber Market Update

Hard Market

The cyber market is officially hard. Having a strong and comprehensive cyber renewal strategy, and a broker with the ability, relationships, and expertise to achieve your goals in a hard market, has never been more important.

We saw steady but incremental rate adjustments throughout 2020, and the cyber market has kicked off 2021 having fully transitioned to a hard market; where we might have expected to see a 10-15% rate increase in 2020 has become a 50-60% rate increase, and 100% (or more) increases are not uncommon. Concurrently, as rates continue to rise, some insurers have begun restricting coverage, increasing self-insured retentions and waiting periods, and imposing coinsurance requirements.

Rates, Retentions, & Restrictions…

Although the market has hardened overall, each insurer is approaching renewal and new opportunities slightly differently. Some key themes, though, are beginning to emerge led by key strategic carriers with dominant market share:

• Average rate increase between 25% and 50%
• “Underpriced” premiums more likely to see rate increases around 100%
• Smaller accounts in an auto-renewal cycle may be disproportionately affected by significant increases on a percentage basis
• Minimum waiting periods of 12, 18, or 24 hours depending on the insurer
• The unwelcome return of sublimits

– Some carriers imposing sublimits and other restrictions on ransomware

– Some carriers imposing sublimits and other restrictions on business

interruption & extra expense

– Ransomware sublimits on a primary cyber insurance policy can have negative

repercussions throughout an excess program

– Excess insurers likely to charge more to drop down

– Overall aggregate capacity could be significantly impaired for an

otherwise insurable cyber event

• Nearly all insurers require a ransomware supplemental application as part of a renewal submission, with some insurers insisting their own application be completed
• Insurers have been more willing to non-renew or walk away from perceived “bad deals” rather than seek to right-size premium and/or retention
• Some insurers are applying a SolarWinds Orion exclusion

– Exclusion can be removed if the Insured can demonstrate certain controls and

patching are in place to have mitigated exposure

Have a Plan, Drive the Process, and Demand Excellence

Although the overall market has changed, there are still carriers willing to differentiate clients with above-average security controls and who are seeking a long-term partnership. The experience, finesse, and customized strategies of CAC’s team of professionals will lead to maximizing coverage and cost savings. Overcoming adversity in a hard and dynamic market is achievable with the right team providing strategic advice and executing at a high-level to deliver better results.

• Pick your team. Insist on a broking team staffed only with experienced professionals.
• Go with market makers. Insist on a broking team of market-makers, not price-takers.
• See the big picture. Think short term (cost), but act long term (coverage, stability, claims paying attitude, and partnership).
• Expect more. Stop accepting “average” advice from your broker and allowing them to simply blame “the market” – demand excellence.

Alternative Capital

CAC’s Cyber and Structured Solutions groups are identifying, sourcing, and building alternative capital solutions specifically for cyber events. These highly bespoke solutions offer access to significant sums of capital and the flexibility to customize insurance policy language to address a wide range of cyber events, some of which may be outside the appetite of traditional insurers. Please contact Adam Lantrip or Sam Levine for additional information.

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