Which Insurers Write Cyber Insurance? Evidence from the U.S. Property and Casualty Insurance Industry

Martin Eling and Jingjing Zhu

Journal of Insurance Issues, 2018, vol. 41, issue 1, 22 - 56

Abstract: This article is the first to analyze the relationship between corporate charac‐teristics and the writing of cyber insurance in the U.S. property and casualty insurance industry. Given that cyber risk is an emerging dynamic and difficult‐to‐quantify risk category, we interpret the writing of cyber insurance as a risky activity, and link our results to the broad literature on insurers’ risk taking. The results show that insurers with more capital, lower asset risk, greater diversification among business lines and geographic areas, and group members are more likely to write cyber insurance. The results for different ownership types are ambiguous: although many mutual insurers are more likely to offer cyber coverage as part of existing policies, stock insurers are more likely to sell standalone cyber insurance. We also analyze the interrelationship between writing cyber risk and capital and reinsurance usage with a simultaneous equation model. Besides the positive relationship between capital and the undertaking of cyber risk, the results show that insurers writing cyber insurance policies use more reinsurance to transfer their risk. [Key words: cyber risk; cyber insurance; risk taking; logistic regression; simultaneous equation model]

Date: 2018
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