Cyber can grow 20% CAGR this decade if it clears reinsurance hurdle

The global cyber insurance market should grow at an annual compounding rate of 20% this decade to put the market well above the $50 billion mark in 2030, provided it can clear massive hurdles in reinsurance, global re/insurance brokerage  Howden has said.

To make the grade, reinsurers would have to triple their contribution, currently at $6 billion in premium, Howden said of a major hurdle on the road. Currently some 45% of premiums are ceded, mostly in quota share deals, but with the industry still smarting from a take-down on capital in 2022.

“Such high levels of growth would be ambitious during favourable market conditions, let alone when supply is as constrained as it is currently in the reinsurance market,” Howden analysts claimed of the reinsurer contribution.

A market shift out of quota share towards excess of loss and tail-risk occurrence covers has already begun to ease capacity pressures, Howden said. Continued investments into modelling and work in risk definitions is also helping warm third party capital to the segment.

If reinsurance capital and continuing concern over systemic exclusions can be cleared, the growth path for direct cyber is heady.

The direct cyber market will nearly hit the $20 billion mark already in 2024 and cross the $30 billion mark at points in 2027 and $40 billion only one year later, Howden's outlook suggests.

Growth will no longer be a story of the type of runaway pricing gains that shaped market size 2020-2022, but should shift into expanded coverage and greater market penetration. Pricing has topped off and even eased back from the peak in select cases.

For their large-cap clients where penetration is already strongest, insurers might ease back on the policy limits and higher retentions demanded to date, Howden suggests.

But the big wins are in penetration: into under-covered regions and the massive pool of under-covered mid- and small-cap firms.

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