Canada Cyber (Liability) Insurance Market Size

Canada Cyber Insurance Market Analysis

The cyber market is relatively young in Canada and small, at about $120 million in annual gross premiums written in 2020. Brokers and insurers in Canada should expect an upswing in cyber insurance demand, as the workforce shifts in the wake of the COVID-19 pandemic. This presents an opportunity for brokers when it comes to selling cyber insurance. That's because working from home as a result of the COVID-19 pandemic has exposed vulnerabilities when it comes to home network security compared to when working off corporate networks.

The Global average cost of a data breach in 2020 is USD 3.86 million. The average cost of data breaches in Canada is USD 4.31 million. The highest average cost of a data breach by country (in the US) is USD 8.64 million.

The cyber market in Canada has evolved more in 20 years than the property market as insurers adapt to new threat landscapes, and with the increase in frequency and severity of cyber claims happening for Canadian businesses, cyber insurers are yet again refining what their product should do for clients. And yet the size of the Canadian cyber market is still relatively small, meaning it takes only one or two significant losses for cyber insurers to react and readjust.

In terms of rates, the insurance market is seeing rate increases, and it is anticipated that treaty renewals are going to continue to see the rate being pushed into 2021. Again, looking at things financially, from a macro perspective, the supply of capital amongst traditional lines continues to be a challenge. Low-interest rates continue to affect reinsurers, which puts a greater focus on underwriting profitability at the insurer level. Couple low rates with a lack of returns in traditional fixed income, and this is going to create headwinds for the industry in general. The cyber market in Canada has been very volatile for most of 2020 with pricing increases range around 10% to 50%, as well as a substantial increase in deductibles.

In terms of cyber coverage, brokers need to be aware that third-party liability coverage for data breaches is only one piece of the overall cyber insurance puzzle. The trends from a coverage standpoint - and the most causes of current cyber claims, are ransomware, social engineering, and business interruption. Not all businesses carry large amounts of personal data that may be targeted in data breaches; however, all businesses are dependent on computers, cell phones and the internet - things that ultimately make them vulnerable to different types of cyberattacks. The one thing that all companies do hold is employee data, which exposes all companies, regardless of size, to a potential data breach. To safeguard against today's cyberattacks, small companies must reassess their security position and ensure adequate measures and controls are implemented, including the purchase of cyber insurance coverage.

In Canada, industries including finance, banking, healthcare, retail, and hospitality - all well known for holding and using personal information - have already been exposed to cyber insurance and the risk of data breaches. Industries like construction, transportation, and manufacturing, as well as smaller professional offices, however, are slowly being exposed to cybersecurity needs and do need more awareness in this space.