Cyber set for ‘outsized growth’, says CyberCube report
But buyers need more innovative products to increase take-up across organisations of all sizes
Increasing digitisation of the global economy and rising concerns about cyber risk will drive exponential growth over the coming decade for cyber insurance, but it remains a capital-intensive peril that requires structural innovation, according to analytics provider CyberCube. It adds that at the large organisations level, there is constraint on the ability of insurers to offer limits that afford meaningful financial protection in the event of a loss.
In a new report from CyberCube, Projecting Cyber Insurance Growth: A 10-Year US Market Outlook, the mid-range projection suggests that the US standalone cyber insurance market could reach $45bn in premium by 2034 – a five-fold increase from today.
CyberCube modeled three CAGR factors for the US insurance industry to 2034: 10% growth resulting in $17bn of premium, 20% growth leading to $45bn of premium, and 30% growth creating $109bn of US cyber premium. CyberCube’s US industry exposure database (IED) reports US standalone premium in 2023 at $8bn.
The report says that cyber will become a peak peril, with the potential for losses from US standalone cyber to exceed Hurricane Katrina, the largest insurable natural catastrophe to date, costing the (re)insurance industry $102bn in 2005. At 20% CAGR, the amount of capital required to manage a 1-in-250-year loss would be $121bn, according to CyberCube.
It notes that the cyber (re)insurance market will need to substantially increase capital to enable this growth potential, with increases needed from multiple sources including insurers, reinsurers, capital markets, and potentially private-public partnerships.
CyberCube’s IED shows that almost three-quarters (72%) of large companies purchase some level of standalone cyber insurance in the US, dropping to 43% for medium-sized companies, 12% for small, and 3% take-up of standalone cyber for micro-organisations.
“Insurers and brokers will need to accelerate current product innovation to achieve deeper penetration across organisations, offering larger limits and broader coverage with more clarity on terms and conditions,” says the report, adding: “The current cyber reinsurance market is tightly concentrated among the largest writers, so one implication is that the market will need broader participation from more reinsurers in order to sustainably distribute and share risk as the market expands.”
Alex Tenenbaum, director of services and lead author of the report, said: “The cyber insurance market is set for outsized growth compared with other lines of P&C insurance over the coming ten years. Structural changes are required to support sustainable growth. Some of these changes are starting to emerge and will require fuel to accelerate their growth – for example, penetration into the small business space and the emergence of the cyber insurance-linked securities market. Some are still very much in their infancy and will require broader market collaboration to unlock, such as public-private partnerships that work for both sides.”
Rebecca Bole, head of industry engagement, added: “The property & casualty insurance sector stands at the threshold of a once-in-a-generation opportunity to build a sustainable market for cyber risk transfer. This enables societal resilience to one of the peak risks facing economies today.”
