The cyber insurance market has the potential to scale to rival the size of other major P&C lines if three major challenges can be successfully navigated according to a new report by global insurance broker Howden.
Howden’s third annual cyber report Coming of Age released in July 2023 reveals that the size of the market could reach $50bn by 2030 as the foundations are in place for the cyber market to scale up.
The realization of this potential is, however, tied to three main factors: distribution, tail-risk management and attracting capital. If these challenges can be navigated successfully, the cyber market is on the cusp of potentially transformational growth.
Also, future growth and relevance of cyber insurance now centres around three major themes: penetrating new markets, addressing systemic risk and expanding available capital.
Surging ransomware claims in 2020 and 2021 led to the cost of cyber cover more than doubling, however, conditions started to stabilize in 2022 as activity relented and more robust risk controls deterred or mitigated attacks.
The developments in 2023 point to a nuanced marketplace, with optimism around more favourable supply dynamics for insurance buyers (off the back of improved underwriting performance for insurers) tempered by resurgent ransomware activity, ongoing concerns about potential systemic losses and capital availability.
This puts the market on a sound footing for growth, but the report shows that more work needs to be done if it is to meet the growing demands of clients worldwide. By overcoming potential limitations around systemic risk, penetration and capital, the cyber insurance market has an unparalleled opportunity to grow.
Howden global head of cyber Shay Simkin said, “Ensuring that cyber insurance is relevant to clients of all sizes, is paramount to improving access in new territories and across different sections of the economy. Attracting capital is also crucial to this goal, a task which should not be underestimated given current macroeconomic challenges and capital constraints.”