30th August 2023
The global cyber insurance market has recently returned to profitability following two years of rate increases and tightening terms and conditions. Annual premiums reached about $12bn at year-end 2022, and are likely to increase by 25%-30% per year to reach about $23bn by 2025.
In a report published this week-"Global Cyber Insurance: Reinsurance Remains Key To Growth,"-S&P Global Ratings says that its survey of global multiline insurers(GMIs) and global reinsurers suggests growth in cyber insurance will depend heavily on reinsurance to provide capital and manage accumulation risk.
"Cyber insurance is still the fastest-growing subsector of the global insurance market. This subsector relies to a great extent on reinsurance protection, and we believe reinsurers remain critical to the sustainable growth of the market," said S&P Global Ratings' credit analyst Manuel Adam.
"Insurers and reinsurers are not immune to cyberattacks on their operations, and any service disruptions or data breaches will likely affect their bottom lines and potentially their capital positions. To better understand the impact, we analysed cyber exposure data from cybersecurity specialist, Guidewire, using its Cyence cyber risk model.
We found that, on average, GMIs and the global reinsurers we rate could withstand a direct cyberattack on their organisations, with a limited impact on capital. However, a direct cyberattack could hit the earnings of some insurers significantly. For one insurer in our sample, we estimate a significant cyber tail loss of about 90% of average annual earnings over a five-year period. This estimate demonstrates that, for several insurers, potential cyber losses may be well above the average for the sample, due to lower profitability or structural shortcomings in cyber risk management and, consequently, lower protection against cyberattacks. This could strain insurers' earnings and, in the long term, curb the buildup of capital buffers, leading to a potential weakening of creditworthiness.
As the cyber insurance market develops, the cyber reinsurance market will mature as well. Despite larger reinsurers signaling that they are close to capacity, we see other reinsurers exploring opportunities to increase their exposure to cyber risk. This would help the market expand responsibly, with a diverse range of reinsurers.
S&P Global Trends(584 articles)
Guidewire Trends(470 articles)
Cyber Trends(1,439 mentions in Insurance Newslink)