Howden, an international insurance broker, has launched its third annual report on cyber insurance titled ‘Coming of Age’. The report forecasts the potential for the cyber insurance market to balloon to a hefty $50bn by 2030.
However, the report outlines three crucial challenges that need to be overcome to harness this potential: distribution, tail-risk management and attracting capital.
Following a market correction due to a surge in ransomware claims in 2020 and 2021, the cost of cyber cover more than doubled. As activity dwindled and robust risk controls were implemented, market conditions began to stabilise. In the first half of 2023, an uptick in ransomware attacks was observed, yet this wasn’t accompanied by a proportional rise in claims. This underlines the effectiveness of risk controls, leading to a more resilient and stable cyber insurance market.
The report highlighted three key areas of concern. The first is war exclusions. Clients are acknowledging the significance of defining coverage parameters for cyber warfare. This would minimise the potential for coverage disputes and give underwriters and investors the confidence they need. Howden’s head of UK Cyber Retail, Sarah Neild, said, “Getting this right is crucial for the sustainability of the cyber market…”
The second concern is penetration. The cyber insurance market primarily remains a large corporate market and efforts need to be increased to engage with smaller companies. Associate Director Dan Leahy noted, “Penetrating new territories and company demographics is therefore pivotal to realising the full potential of cyber insurance.”
The third challenge lies in reinsurance capital. Cyber reinsurance supply will need to amplify significantly to meet the expected demand by 2030. Shay Simkin, Global Head of Cyber at Howden, added, “Attracting capital is also crucial to this goal, a task which should not be underestimated given current macroeconomic challenges and capital constraints.”
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