Following a pause to stabilize the vessel, the cyber market is poised for a wave of growth that could make it larger than the property-catastrophe market by 2040, said Gallagher Re.
In fact, if the cyber market continues to grow at its current pace, it will exceed property or casualty in terms of annual reinsurance premium between 2032 and 2033, according to projections in a new report, “CY-FI: The Future of Cyber (Re)Insurance.”
Growth in the cyber market has been thwarted by a lack of capacity but cyber insurance carriers have engaged in an “underwriting revolution” as they reassess and reunderwrite portfolios, said Gallagher Re.
Rates have increased, and the market is asking more targeted security questions of clients before giving coverage. Carriers have tightened terms and clarified or strengthened exclusions and coverage restrictions. Additionally, technology has been deployed by carriers to improve risk selection.
Gallagher Re said retention rates are currently at an all-time low but demand for cyber insurance has continued to grow. By next year, steps the market took to shore up portfolios will begin to have an impact, improving confidence from capacity providers. The cyber market will also return to a focus on product innovation, which was put somewhat on hold in favor of the “stabilization of past growth, as [the market looked] to maintain or reduce aggregate over the pursuit of growth,” Gallagher Re added.
In the next wave of growth, Gallagher Re predicts significant product innovation, expansion into new territories and evolution in distribution. Cyber insurance will continue to drive cybersecurity, particularly among small and midsize enterprises, to produce more attractive insureds.
Not only will cyber insurers need more data and models to achieve the growth predicted by Gallagher Re, cybersecurity firms and insurers will “race to partner with, buy and set up insurance companies to assist with distribution or to provide a warranty function behind their product.”
Gallagher Re anticipates cyber insurance to be the most purchased type of insurance globally across personal lines, SMEs and large businesses—and a large portion of the auto insurance premium could become part of the cyber market as it starts to eclipse property insurance.
The play on words in the title of the report was intentional, said Gallagher Re. While acknowledging that many works of science fiction forecasted the future, its report “remains entirely a work of fiction, but for now we’ll enjoy the next chapter in the most dynamic and exciting of classes.”