Travelers Cos Inc. plans to stick to its recent growth pace for sales of cyber insurance, which protects businesses against hacking and other liabilities, despite potential to boost it, as the insurer assesses risks in the segment, its head of specialty insurance said on Monday.
“We feel like we’re just in the right spot,” Thomas Kunkel, the insurer’s president of bond and specialty insurance, said during an investor meeting in Connecticut.
Travelers has increased its cyber business at a 40 percent compound annual growth rate since 2011 and could quicken the pace, Kunkel said. “It would not be hard,” he said.
But Travelers must be “respectful and prudent” about the risks involved in cyber, Kunkel said.
Insurers have said the growing sophistication of hackers alongside a still-evolving cyber insurance industry makes it difficult to quantify their potential cyber-related losses.
About three-quarters of cyber policies that Travelers writes cover up to $1 million in damages, while nearly a quarter cover between $1 million and $5 million, the company said.
“We manage our limits very closely,” Kunkel said.
Equifax Inc., which compiles credit information about consumers and assigns them scores, disclosed in September that cyber criminals had breached its systems between mid-May and late July and stolen the sensitive information of 145.5 million people. The hack is among the largest ever.
Regulation will also drive demand for cyber insurance, particularly in the financial services sector, Fitch Ratings said in a report on Monday.
“As the cyber insurance market develops, competition is likely to erode profit margins,” Fitch said.
Some insurers who ultimately enter the cyber market may lack underwriting experience and take on risks that could exceed their capital, Fitch said.
Events that could trigger large claims include cyber attacks on electronic grids and transportation systems, or hacks of large data storage clouds, Fitch said.
Insurer American International Group Inc. said on Oct. 26 that it was reviewing all types of coverage it offers to gauge its exposure to cyber risk.
AIG will start including cyber coverage as part of its commercial casualty insurance during the first quarter of 2018, Tracie Grella, global head of cyber risk insurance, said at the time.
The move would boost rates but also make it clearer how customers are covered if they are the victim of a security breach.
Many commercial insurers offer stand-alone cyber coverage, but it is not yet a standard addition to most other policies, such as property and casualty.