“Whilst cyber reinsurance premiums are currently in the range of $6 billion, they would need to increase more than three times over in order to fulfil growth expectations by the end of the decade,” analysts at international insurance broker Howden suggest.
According to the analysts, such high levels of growth would be ambitious during favourable market conditions, let alone when supply is as constrained as it is currently in the reinsurance market.
“The direct market’s use of reinsurance is the single biggest differentiator between cyber and any other class of business,” Howden explains.
The firm continues, “With approximately 45% of cyber premiums ceded to reinsurers currently, broad capacity constraints and price corrections in the reinsurance market present potential limitations.”
Indeed, Howden notes that if the cyber market is to scale up to rival other major lines of business, cyber reinsurance supply will need to increase significantly in order to meet demand between now and 2030.
The analysts write, “Further innovative thinking around matching risk to capital is needed to realise the full potential of cyber (re)insurance from here.
“Growing consensus on risk definitions, alongside product innovation around systemic exposures, in particular, are already attracting third-party investors.”
Howden suggests that maintaining focus and momentum in this area will be “crucial” to seeing alternative capacity becoming an integral part of the cyber market’s capital structure.
Shay Simkin, Global Head of Cyber, Howden, commented, “Ensuring that cyber insurance is relevant to clients of all sizes is paramount to improving access in new territories and across different sections of the economy.
“Attracting capital is also crucial to this goal, a task which should not be underestimated given current macroeconomic challenges and capital constraints.”
Simkin continued, “Howden remains committed to advocating for clients as the market adapts to what is a fluid and highly charged threat environment.
“As one of the biggest global insurance intermediaries in the world, we are conscious of our responsibility to inform the discussion in the interests of clients. Our report attempts to do just that.
“The analysis included extends to other critical areas such as supply chain risk, the fallout from the Ukraine war and read-across implications for future conflicts.
“By bringing important market trends to the fore, Howden is leading the discussion, enabling us to facilitate the most innovative client solutions and secure unrivalled access to capital providers.”
