By Matt Sheehan — A new report on the US cyber market by re/insurance broker Aon shows that the overall industry loss ratio jumped up by 22.0 percentage points last year to reach a record high of 67.0%.
Analysts attributed that increase primarily the growing severity of ransomware claims, which included heightened incident response costs and extortion demands.
Aon’s US Cyber Market Update found that both the Standalone and Package segments saw their highest loss ratios since data collection began in 2015, with Standalone cyber policies recording a 25.7 percentage point increase (from 47.1% to 72.8%), and Package policies a 16.4 percentage point increase (from 42.3% to 58.6%).
The 2020 loss ratio increase appears to be primarily due to an increase in claim severity, as the average claim size rose more than 50% from $48,709 in 2019 to $74,354 in 2020.
However, claim frequency remained steady over 2020, averaging 5.62 claims per 1,000 policies, compared with 5.61 claims in 2019.

Additionally, Aon reported that US cyber insurance direct written premiums totalled $2.74 billion in 2020 – an increase of 21% over the $2.26 billion recorded in 2019 across both Standalone and Package products.
This also means that premiums have more than double over a five-year period, given that 2016 premiums totalled just $1.35 billion.
Meanwhile, cyber rates increased by 2.5% on average during 2020, which Aon sees as corresponding to period of time prior to insurers taking significant steps to address ransomware trends, including rate increases and underwriting actions later in 2020 and early 2021.
“Last year we said that we believe the next several years will be the proving ground for the cyber insurance thesis – that by putting a price on risk, insurers will help improve cybersecurity hygiene and reduce the cost of cyberattacks,” said Jon Laux, Aon’s Head of Cyber Analytics for Reinsurance Solutions.
“This remains true,” he added. “Insurers are pursuing many interesting tactics to address the claims environment, even as we see new developments opening in the threat environment. It’s a fascinating time in the industry. Stay tuned.”
Aon’s report also took note of the continued development of the small commercial cyber segment, where both growth rates and loss ratios outperformed the rest of the industry.
“Although many have remarked on the impact of ransomware attacks on small businesses in 2020, the segment still ran at a lower loss ratio than the industry as a whole,” analysts said. “Understandably, insurers have found small businesses to be an attractive segment.”
Loss ratios for the small commercial cohort averaged about 54.6% in 2020, while frequency for these insurers was 25% lower than industry averages, and severity was 26% lower as well.