In 2025, the reinsurance market, especially for coverage of cyber incidents, will continue growing, according to experts from reinsurers who spoke at the
Reinsurers are working to better understand long-term cyber loss trends and what reinsurance offerings are well equipped to respond to what they are finding, especially with technology errors and omissions (E&O) coverage.
The reinsurance market is "extraordinarily profitable," said Erin Flaherty, senior vice president, treaty broking in the Cyber Center of Excellence at Guy Carpenter. "This is a good place to put your capital for reinsurance providers and other alternative types of solutions," she said. "Five years ago, the size of the market was maybe a third of what it is today. So we think it's something like $15 to $16 billion. Depending on who you ask, who's come out with their numbers, it could be three times that in the next 10 years."
Going forward, businesses should look at cyber breach events and losses as tools to refine their views of risk, Flaherty stated. Over the last six to seven years, businesses have been asking when cyber insurance coverage will mature and grow, she added, and now, "we're in it. Welcome," she said. "We're in it now."
Still, reinsurers do not have a concrete handle on long-term performance and long-term loss ratio projections, according to David Grigg, executive managing director, Aon Reinsurance Solutions.
"There's still a lot of open questions about the true long term performance of these books of business," he said. "That requires a lot more data than the industry has. It requires segmented data based on industry sector as well as size. All of that data will help the accuracy of the model."
More attention-getting cyber breach losses makes cybersecurity a ripe field for new reinsurance products, according to Flaherty. In Digital Insurance's
As Grigg noted, 2024 saw an increased number of cyber insurance insurtech startups, partly in reaction to an "explosion" of ransomware incidents.
Businesses both large and small are demanding greater cyber insurance capacity from the reinsurance market, according to Grigg. This is evident in the interest for event-based coverage types including miscellaneous professional liability (MPL), industry loss warranty (ILW) and quota share reinsurance agreements, as well as insurance-linked securities (ILSs) traded in bond markets.
"It's quite healthy that the market is developing so there's similar event based coverage," said Tom Spurgeon, underwriting manager and cyber product lead at Liberty Mutual Re. This makes it possible to get aggregated event coverage, he added.
The increase in notable cyber breach incidents made it seem like businesses needed catastrophe coverage, creating a danger that insurers have let technology E&O coverage weaken, according to Grigg, but tech E&O "remains a really, really valuable business segment," he said.
The long-term health of a business depends on adopting reinsurance for specific scenarios, according to Brett Nakano, head of cyber U.S. at Swiss Re. Protection should be tailored to the scenarios a business is looking at and rising estimated maximum losses, he added.
