Is the cyber reinsurance market positioned for growth?

Why growth is not going to come from traditional sectors

Is the cyber reinsurance market positioned for growth?


By Mia Wallace

“The future of the cyber re/insurance market looks extremely promising.”

This affirmation opened CyberCube’s ‘Cyber Predictions Report 2024’ and, during a recent webinar exploring the key themes of the research, specialists from across the cyber re/insurance market answered pressing questions on where the sector stands today and whether it’s still positioned for growth.

Lending his insights, Rory Egan, head of cyber analytics at Aon Reinsurance Solutions underscored how the market has grown since he joined it in late 2015. Back then the market was estimated at circa US$2 billion in GWP, he said, while at the latter end of 2023, it was estimated at circa US$15 billion. However, he added that he anticipates more moderation in 2024.

“Whilst in the past, we have, as a market, achieved the lofty growth expectations, we had a little bit of luck along the way,” he said. “If you look at the top line, there was a big response to increased claims for ransomware, in particular, for a couple of years, and the market responded with significant rate increases. So we reached the previous lofty targets, by accident in a way.

“I think going forward, yes, there will be growth, but it's going to come from not from the typical areas like Fortune 1000 companies, but we're going to open up new markets in places like China and India, and new products in personal-lines cyber, micro and SME.”

What’s happening with cyber insurance penetration rates?

Echoing this, William Finley, senior cyber underwriter at QBE Insurance, noted that the insurance group tends to examine penetration rates of cyber insurance when making growth predictions. Certainly in the UK and international space, he said, SME is at around the 15% mark while larger corporate is at a penetration mark of about 40%. He expects to see a significant amount of new growth but added it won’t come through rate but rather new insureds entering the market for the first time. 

Christopher Shafer, VP, head of North American cyber, Odyssey Reinsurance Company also affirmed his belief that the cyber re/insurance market is well-poised for growth, and he said the reinsurer is also seeing an increase in limits being pushed up, which will inherently bring some additional premium to the sector. Overall, he said, he expects to see new segments and different geographies being accessed. Like Egan and Finley, he does not expect growth in the market to be driven by rate just yet.

Is there sufficient capacity available in the cyber market today?

As to whether the primary and reinsurance capacity available in the market today is adequate to support this growth, Egan highlighted that on the primary side, it’s now understood that it’s possible to build towers of more than $500 million, which reflects improvements in the market. Meanwhile, on the reinsurance side, he said, there’s been a lot of appetite and supply coming back into the market.

“At 1/1, I think some reinsurers were slightly disappointed on the back of it in that they didn’t manage to achieve the full level of participation that they wanted to in the market,” he said. “[That was as] the buyers of reinsurance looked at their portfolios and started to get more comfortable with the risk at a portfolio level and so retain a little bit more of the risk, without needing as much reinsurance

“… There’s more supply right now, which worked in the favor of buyers at 1/1. But if we go further into the future, if we really want to achieve the growth targets that are out there, then we will ultimately need more supply than is currently available. And that’s where the whole [conversation is] around traditional reinsurer versus ILS and unlocking that additional capacity.”

From Shafer’s perspective, the challenge is responding to the forms that reinsurance capacity is taking. Some quarter-share participations have changed, he said, with some companies not necessarily buying as much as they have in the past, but there’s still healthy activity on the non-proportional side, around aggregate stop-losses and event covers. For him, it’s about reinsurers remaining responsive to how buyers want to buy and being able to meet them with the capacity to suit those needs.

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