The cyber reinsurance market is struggling to deliver the additional 20% to 30% of capacity it needs each year “just to stand still”, which is contributing to the capacity crunch at primary level, according to Anthony Cordonnier, global co-head of cyber at Guy Carpenter.
He urged more reinsurers to enter the “condensed” marketplace and, in better news, said more are in talks about writing the line of business.
Cordonnier made the comments at Advisen’s 2022 Cyber Risk Insights Conference in London yesterday, during a panel debate on the next stage of the global insurance market.
The cyber insurance market is extremely tough for primary buyers, with rates doubling in both the UK and US during Q1, according to Marsh. In addition, capacity restraints are making cover harder and harder to come by as insurers demand more and more cyber risk controls before indemnification.
Shannon Fort, partner, financial lines-cyber at McGill & Partners, warned at Advisen’s event that a growing number of companies are now unable to buy cyber cover because of capacity restraints and dwindling carrier choice. This is a happening for the first time in her career, added the broker.
Cordonnier said moves by primary carriers to address rising cyber losses are the big driver of market hardening and capacity issues . However, he said problems in the reinsurance space, where reinsurers are finding it hard to keep up with demand from insurers, are also playing their part.
“The influx of capital that is constantly needed for cyber just to stand still is about 20% to 30% every year,” said Cordonnier.
When asked if that is happening, he said: “Yes and no.”.
“We are getting more capacity every year. Many reinsurers are growing and pumping more capital into the class, especially now we are seeing results improving due to rating and underwriting actions that the primary market has been taking. But we still need new players to come to the table,” said the broker.
Adding: “Some reinsurers that don’t currently write cyber are thinking about it. So, there are a lot of discussions with carriers that are interested in the risk but have not really started writing it. It is our job as brokers to help them with data insights on the risks and help bring their capital to the table.
“So I would say yes, capital is coming in, but the reinsurance market is incredibly condensed. If you look at maybe three years ago, I would say the top five cyber reinsurers were accounting for something like 50% of the total reinsurance premiums… now it is closer to 70%. So, you get more concentration. We will see that change again, but at the moment that is one reason why we now have the capacity restraints, because of that dominance,” he said.