The number of Marsh managed captives writing cyber increased by 75% between 2020 and 2022, according to a recent Marsh US Cyber Purchasing Trends report.
“Captives have become an incredibly useful tool for organisations over the last couple years as they’ve grappled with difficult cyber market conditions,” said Ellen Charnley, president of Marsh Captive Solutions.
“In some cases, organisations are funding portions of their cyber risk into a single parent captive such as a deductible or a self-insured retention, in other instances they are using a captive for quota share arrangements or to access reinsurance.”
Average US cyber rate increases continue to decline from December 2021 highs: 17.1% (Dec. 2022) vs. 133% (Dec. 2021).
The Report also highlighted that after slowing in 2022 compared to 2021, ransomware-related claims rose 77% in the first quarter of 2023 compared to the fourth quarter of 2022.
The Federation of European Risk Management Associations (FERMA) recently called upon the insurance industry to adopt a more collaborative approach to cyber insurance which balances the risk appetite of the market with the coverage requirements of corporate buyers.
In order to combat the cyber capacity issue, Marsh revealed at RISKWORLD that it will be launching a special purpose cyber reinsurance facility in the coming weeks, which will be made available to captive owners seeking additional cyber capacity.
Captive intelligence recently published a long-read detailing how a lack of capacity and high pricing in the cyber market are resulting in increasing captive utilisation for cyber risk.
Greg Eskins, US cyber product Leader at Mash, said: “The increase in the number of organisations purchasing coverage is a positive trend, reinforcing the view that insurance is an important part of a holistic cyber risk management strategy.
“Buyer uncertainty still remains however, namely around war, cyber operations, and systemic/catastrophic risk exclusions, which we continue to tackle on behalf of clients,” he added.
“Cyber insurance products need to resonate most with those who invest in cyber insurance products to protect against strategic risks.”