US standalone cyber insurance market could reach $45bn in premium by 2034: CyberCube

In a new report based on CyberCube’s cyber risk aggregation tool, Portfolio Manager, mid-range projections suggest that the US standalone cyber insurance market could reach $45 billion in premium by 2034, marking a five-fold increase from today.

CyberCube’s report, “Projecting Cyber Insurance Growth: A 10-Year US Market Outlook”, noted that this rapid growth will be driven by the increasing digitisation of the global economy and rising concerns about cyber risk.

“There is little controversy in the statement that the cyber insurance market is set for outsized growth compared with other lines of P&C insurance over the coming 10 years. There is some concern, however, about what factors must come together for this growth to be achieved,” CyberCube’s report read.

According to the firm, the cyber re/insurance market will need to substantially increase capital to enable this growth potential, with increases needed from multiple sources including insurers, reinsurers, capital markets, and potentially private-public partnerships.

Product innovation will also reportedly be required to achieve real growth in exposures, rather than mainly rate increases, as seen in recent years.

“Given low penetration rates for coverage of cyber risk today, insurers and brokers need to achieve deeper penetration across organizations, offering larger limits and broader coverage with more clarity on terms and conditions,” CyberCube explained.

Alex Tenenbaum, Director of Services and lead author of the report, commented, “The cyber insurance market is set for outsized growth compared with other lines of P&C insurance over the coming 10 years.

“Structural changes are required to support sustainable growth. Some of these changes are starting to emerge and will require fuel to accelerate their growth – for example, penetration into the small business space and the emergence of the cyber Insurance-Linked Securities market.

“Some are still very much in their infancy and will require broader market collaboration to unlock, such as public-private partnerships that work for both sides.”

Rebecca Bole, Head of Industry Engagement, added, “ The P&C insurance sector stands at the threshold of a once-in-a-generation opportunity to build a sustainable market for cyber risk transfer. This enables societal resilience to one of the peak risks facing economies today.”

CyberCube’s report also underlined how cyber will become a peak peril for P&C insurers, with potential losses exceeding those of the largest natural catastrophe event to date, Hurricane Katrina.

“Regulators and ratings agencies will need to apply similar levels of rigor to how risk is being managed for cyber exposures as they currently apply to natural catastrophe risk,” the firm’s report said.

CyberCube continued, “Carriers will need $121 billion of capital to manage capital to a 1-in-250-year loss, a 500% increase on current capital requirements. CyberCube proposes that diversifying capital sources will be required to support catastrophe exposures, predominantly from capital markets capacity in the form of insurance-linked instruments, and public-private partnerships with the federal government.”

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