Economic fallout of the COVID-19 pandemic is likely to test the US cyber insurance market, according to a new report by Fitch Ratings.

“Cyber insurance continues to be a small but profitable market, representing a modest portion of premium risk for individual P/C insurers,” Fitch said. “However, a large unforeseen cyber event, such as a massive cloud intrusion or an attack on infrastructure, could result in substantial individual incurred losses that could pressure capital levels and individual ratings.”

Direct written premiums for cyber insurance grew by 12% in 2019 to more than $2.2 billion. That’s up from 8% growth in 2018. $1.3 billion in cyber stand-alone direct premiums were written in 2019, up nearly 14% from 2018. Demand for cyber coverage also continues to rise.

Recent premium rate hardening for the US commercial lines market hit the cyber segment last year, with a survey by the Council of Insurance Agents & Brokers reporting a 2.9% increase in rates for cyber policy renewals.

“However, 2020 segment premium growth will be tempered by reductions in underwriting exposures from the recent sharp economic contraction tied to the coronavirus pandemic,” Fitch said. “Cyber coverage purchase practices may change meaningfully in the near term with mounting strain on corporate budgets and profits.”