Senior executives at Munich Re have warned that the re/insurance industry “might lose relevance” if it doesn’t find ways to meet the growing demand for cyber cover with new products and services.
Speaking at the reinsurer’s 2022 RVS briefing in Monte Carlo this week, CEO of Reinsurance Torsten Jeworrek noted that there is still “strong demand” in the cyber market, despite a lack of available capacity.
He added that Munich Re’s performance in “all years” with cyber has been “very good” and that the sector continues to offer extremely attractive growth prospects.
Analysts at the firm expect the worldwide cyber market to grow from $10 billion as at the end of 2021 to around $22 billion in the next four years.
“That is not surprising at the end of the day because the more we are in the digital environment, be it internet businesses, be it real assets and machines and everything, the more that all depends on digital information and business models to model risk,” Jeworrek told attendees at the Monaco conference.
“It’s important to the manufacturers and to the customers,” he added. “So the demand is there.”
Munich Re’s leadership did, however, note that their positive experience does not necessarily reflect the broader market experience, as players have withdrawn capacity only following an increase in losses and poor results.
With prices now soaring as a shrinking supply of coverage fails to meet the growing demand, the United States continues to be viewed as the most important cyber market, although the executives did acknowledge that other markets such as Europe and Asia are “catching up.”
On Munich Re’s position in the market going forward, Jeworrek explained: “We have always we always said we want to develop that market with good underwriting expertise, with good cooperations, and with tech companies.”
“You need a lot of tech insight and know how to understand the development of cyber risk, because that is not a long-term business in terms of the risk which remains unchanged,” he continued. “The cyber risk changes every minute, every day. And we have to understand that we want to be a technical, conservative and good underwriter.”
Jeworrek also asserted that Munich Re has “an ambition to develop that market” and has accordingly invested heavily into its technical capabilities and expertise on the cyber front.
“We have more than 100 cyber underwriter who are specially trained and a lot of relationships with tech companies also,” he reported. “So we feel quite good. But again, pricing and technical understanding and underwriting quality is a must for us.”
During the same Monte Carlo briefing, Jeworrek also addressed the challenges facing Munich Re and the wider reinsurance industry as it heads into the critical 1/1 renewal period and said that Munich Re has no ambition to shrink its capacity on offer despite the “highly uncertain” market environment.