Top cyber underwriters are shifting away from packaged towards standalone policies due to expensive litigation, according to AM Best.

The ratings agency expects the trend to continue, which may lead to better pricing and modelling.

Until now, most claims have been covered under traditional products such as commercial general liability, business interruption or directors and officers’. 

However, due to the general language of these policies, many insurers have decided tailored cyber coverage is more efficient and effective.

Last year 67.9% of the top cyber underwriters’ $US1.3 billion ($1.72 billion) direct premium written (DPW) was on a standalone basis, with the remainder packaged.

The top 20 underwriters wrote $US1.2 billion ($1.59 billion), of which 73.7% was standalone. 

Among the top five, 81% of the $US699 million ($926.1 million) written was standalone.

“This transition to standalone cyber policies may contribute to better pricing and reserving methods, which may ultimately lead to refinements in modelling tools and contribute to more accurate understanding of risk aggregation,” AM Best says.

DPW for both standalone and packaged policies increased 34.7% from 2015 to last year.

AM Best says while cyber coverage, estimated to range from $US7.5 billion ($9.93 billion) to $US20 billion ($26.49 billion) by 2020, presents a huge opportunity, companies should be prudent due to the risk’s uncertainty.

It also questions the current growth trajectory’s longevity and whether increased demand is sustainable beyond “the typical bump” that occurs after every major breach.

It expects most products will be offered by a limited number of companies due to the intricacies of cyber coverage.