How the cyber liability loss ratio fared in 2022

Canadian cyber liability insurance seems to have turned a corner on its loss ratios, even accounting for reserve releases, says an industry financial observer.

With net incurred claims of negative-$178.7 million last year and net premiums earned at $372.7 million, the Canadian P&C industry recorded a claims ratio of negative-48% in cyber liability for 2022.

Why the negative loss ratio? Cyber insurers reserved more funds than they needed ($76.2 million in prior year reserve releases) to pay for outstanding cyber claims in 2022, putting the cyber claims ratio into negative territory.

And so what does the loss ratio look like without those reserves?

“The cyber net loss ratio stood at negative-48% after reserve releases, and after reserving $76.2 million of prior year reserve releases, the accident year cyber loss ratio stood at negative-28%, which is still phenomenal,” Joel Baker, CEO of MSA Research Inc., told Canadian Underwriter.

These figures are reflective of the better, more stable place the market has been in during the last few quarters, compared with the worst ratios of the last two to three years, when underwriting controls were less strict.

These loss ratios have highly improved since 2020, where the industry saw its cyber loss ratio top 400%—meaning cyber insurers on average paid more than $4 for every $1 received in premiums.

Last year, the cyber liability line had about 181.1-million policies in force in 2022 and incurred 191,000 direct claims.

However, despite the industry’s stellar cyber loss ratios, Canada still had the third-highest cybercrime density in the world in 2022, according to cybersecurity company Surfshark.