Cyber insurance faces up to 10% loss from CrowdOut

Insured losses for standalone cyber insurance to reach up to $1.5b.

Preliminary insured losses from the 19 July CrowdOut event for the standalone cyber insurance market are projected between $400m and $1.5b. This represents a roughly 3% to 10% loss ratio impact on the global cyber premiums of $15b today. 

This scale of loss could make the CrowdOut event the largest single-insured loss event in the history of the affirmative cyber insurance industry over the past 20 years. However, it does not approach the extreme scenarios currently modelled by cyber insurers and reinsurers, CyberCube forecasts showed.

Based on CyberCube's current estimates, the event represents a loss between the 1-in-2 and the 1-in-6-year industry loss return periods according to their cyber catastrophe model and industry exposure database. 

CyberCube’s Portfolio Manager product, used by 30 of the 40 largest US and European cyber insurers, indicates far more destructive scenarios, reaching loss ratios of 234% in extreme events at 1-in-200 year return periods. 

Thus, while the CrowdOut event is significant for the cyber insurance market, it does not approach the destructive potential for which leading insurers are prepared.

Although the estimated insured loss numbers are relatively muted, this event provides valuable material for counterfactual analysis to validate model credibility. For example, had this event been a malicious ransomware attack that disabled a large number of computer systems, the losses would have been much higher.