The global cyber insurance market expects another year of growth in 2024
The global cyber insurance market is set for another year of growth in 2024, but experts warn of increased risks, according to the Insurance Risk Monitor study by actuarial consulting firm OAC.
After record growth in 2023, when global cyber insurance volumes increased rapidly, a similar trend is expected in 2024 as well. This growth is due to both deeper penetration into business sectors and absorption into emerging industries.
The size of the global cyber insurance market could reach $50 billion by 2030, although realizing this potential depends on three key factors: distribution, risk management and capital raising.
After a significant correction in the cyber risk insurance market due to a sharp rise in ransomware claims in 2020 and 2021, conditions began to stabilize last year as activity eased and more robust risk controls contained or mitigated attacks, according to data from insurance broker Howden.
However, despite the fact that the rating environment remains largely profitable, experts warn that the risk of a market decline has increased significantly. Factors contributing to this risk include the use of artificial intelligence by cybercriminals, increased threats of state-sponsored attacks, and the proliferation of risk through interconnected devices. This was noted by Forinsurer in a report on new trends in insurance.
Despite intensifying competition in the insurance market, tariffs are considered sufficient for insurers to make a profit from underwriting. Notably, recent exclusions from state-sponsored cyber-attack insurance policies for certain cyber risks have prompted companies to look elsewhere for insurance coverage. Nevertheless, this change did not significantly reduce the volume of insurance premiums due to the increase in tariffs.
Cyber insurance remains an attractive market for existing companies and new capital, and there are good opportunities for growth and underwriting profits.
Interaction with policyholders, policyholders and cedants is key to ensuring high underwriting performance. Policyholders and cedants are increasingly turning to their insurance partners for experience and advice, primarily in mitigating cyber risks. Working together usually pays dividends as it can improve the claims experience and rate levels as policyholders appreciate value-added services, analysts say.
Actuaries and risk managers play an important role in today’s rapidly changing environment. Historical experience will likely need to be adjusted to reflect changes in the overall risk environment, coverage conditions, and mix of sectors as this type of insurance evolves.
Risk managers are uniquely positioned to help insurers understand the risk of revenue declines and the causes of accumulated losses across the entire cyber portfolio. Various models of analytics providers have emerged for cyber insurance, but they are still in their infancy and not yet as mature as natural disaster models.
Scenario analysis and deep actuarial immersion are perhaps the best tools currently available to truly understand risk, according to OAC actuaries.