MONTE CARLO, Monaco “The cyber liability reinsurance market is stable but unlikely to grow significantly until more sophisticated underwriting tools are developed to assess the risks,” reinsurance executives say.
While the world’s largest reinsurers plan to maintain their levels of cyber reinsurance premiums, better computer models are needed to measure exposures, they said during presentations and meetings at the Rendez-Vous de Septembre reinsurance meeting in Monte Carlo last month.
In 2021, the global cyber insurance market premium was close to $10 billion, and by 2025 the market should grow to more than $20 billion as the world becomes more dependent on digital processes, said Torsten Jeworrek, chairman of Munich Re̵7;s reinsurance committee.
Mr Jeworrek said the demand is there and the reinsurance industry “may lose relevance” if it does not have the “ambition” to meet it through products and services.
However, recent loss experience has led to a reduction in insurance capacity and increased rates, with cyber liability in the US, the world’s largest cyber market, increasing by about 80% since 2020, Jeworrek said.
Munich Re recorded $1.4 billion in cyber liability premiums in 2021, representing a market share of about 14%, he said.
SCOR SE’s cyber premium is about $200 million, a relatively small percentage of its total premium of $9 billion, said Laurent Rousseau, CEO of the Paris-based reinsurer.
“The main reason for this lack of development has been uncertainty about what is our accumulation,” he said.
Reinsurers are unsure of likely maximum loss estimates because cyber risk is evolving so quickly, Rousseau said.
Hannover Re SE has about $550 million in cyber premium volume, says Silke Sehma, a member of the reinsurance company’s board.
“In the future we will be able to grow some, but for now we are fine with what we have,” she said.
Cyber limits have narrowed and insurers have raised rates significantly so portfolios are more profitable, said Tim Gardner, New York-based global CEO of Lockton Re, a unit of Lockton Cos LLC.
“I think reinsurers are quite comfortable reinsuring the business, the problem is just the capacity; we’re running out of capital to support the business,” he said.
Everest Re Group Ltd. wants to grow its cyber book,” said Jill Beggs, the Warren, New Jersey-based head of North American reinsurance for the reinsurance company.
“We want to be cognizant of how we write cyber, but we believe, given the changes in the rating environment, that there is an opportunity for us to deploy more capacity in the cyber market,” she said.
Everest recently hired the former Nationwide Mutual Insurance Co. cyber underwriter Catherine Rudow to the newly created position of global head of cyber reinsurance.
Demand for cyber reinsurance has increased as commercial and personal insurers increase their cyber premiums, said David Priebe, New York-based chairman of Guy Carpenter & Co. LLC.
“One of the things we will continue to work on is how we develop more capabilities for cyber. One of the keys to unlocking that is having a greater understanding of modeling systemic cyber risk,” he said.
Improved modeling would also give capital markets investors more confidence in cyber risk assessment and provide more capacity via insurance-linked securities, he said.
Verisk Analytics Inc. has been modeling cyber risk for about five years but decided earlier this year not to invest further in cyber modeling until the insurance market stabilizes, said Jay Guin, Boston-based vice president and head of research for extreme event solutions at the catastrophe modeling firm.
“Right now the market is quite chaotic, because there are a lot of companies reducing exposure or excluding exposure, so we have made a decision to observe for a while,” he said.
Denexus Inc. is testing a cyber risk quantification tool for the renewable energy sector, said Jose Seara, CEO of the Sausalito, Calif.-based cyber risk firm.
The company has been collecting cyber risk data from a group of energy companies since 2020 and is working with insurers, reinsurers and ILS providers to build probabilistic models, he said.
The company uses a cloud-based system, which incorporates blockchain technology, to enable the parties to securely share information about the risks, Mr Seara said.