BMA report reveals $7.75bn surge in cyber insurance premiums and a $120bn market forecast

The Bermuda Monetary Authority (BMA), the island’s regulatory body for financial services, has released its annual Bermuda Cyber Underwriting Report, showcasing a significant 63.7% increase in cyber insurance gross written premiums, which reached $7.75 billion in 2022.

According to the report, this increase reflects Bermuda’s growing significance as a reinsurance hub in the global cyber insurance market, which is expected to expand from $13.5 billion in 2023 to $120.47 billion by 2032.

The report also notes that small and medium-sized enterprises (SMEs) are particularly vulnerable, with 73% experiencing cyber incidents in 2023.

It further points to notable growth in the captive insurance sector, where cyber GWP rose by 14% to $172 million, and the number of captives increased from 28 to 33.

One captive insurer alone contributed more than half of this total, with 69% of premiums written directly and reinsurers covering the rest. This growth highlights the importance of captives in managing cyber risk effectively.

According to the BMA’s report, a key focus is improving insurers’ ability to manage cyber risk accumulation and silent cyber exposures. It indicates that 37% of insurers had not yet implemented clear exclusions for cyber risks by 2023, although this represents an improvement from the previous year.

To address this, the BMA will require all insurers to complete mandatory stress and scenario tests starting in 2024, aiming to enhance industry resilience through consistent preparedness measures. The authority emphasise the need for insurers to regularly review their risk assessment processes, including the tools and models used to quantify cyber risk.

Disclosures related to these assessments will be scrutinised in the context of liquidity and capital levels to ensure preparedness for cyber catastrophes. The BMA will also mandate annual model validation and backtesting to maintain accuracy in managing risk accumulation.

Furthermore, the report highlights Bermuda’s growing role in the cyber Insurance-Linked Securities (ILS) market, with Bermuda-based insurers issuing $670 million in cyber-specific ILS in 2023.

This development is seen as a promising step toward bridging the $900 billion global cyber protection gap. The BMA anticipates continued growth in this sector, driven by advancements in cyber models and parametric technologies, which are expected to attract third-party capital.

The report underscores the importance of operational cyber risk management for insurers themselves. The BMA stresses the need for compliance with the Insurance Sector Operational Cyber Code of Conduct, introduced in 2022, and provides a benchmark for comparing practices to industry standards.

While Bermuda’s cyber insurance market has made substantial progress, the BMA’s review of 2022 filings highlights areas needing further improvement, including stress testing, silent cyber risk management, and enhanced disclosures in CISSA/GSSA submissions.

With the rapid evolution of cyber threats and advancements like Generative AI, the BMA plans to implement several key measures, including mandatory stress tests for all insurers by the end of 2024, improved CISSA and GSSA reviews, and a new Guidance Note on cyber underwriting.

The BMA will continue to engage with industry stakeholders to ensure Bermuda maintains its leadership position in the global cyber insurance market.

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