Cyber annual growth rate of more than 10% expected for next five years

By Michael Loney

April 25 - (The Insurer) - While growth has slowed in recent years, the global cyber insurance market is still expected to record double-digit growth in the next five years.

In a report released in April, Munich Re forecast that global cyber insurance premiums would reach $16.3 billion in 2025, with the market on course to more than double in size by 2030.

The reinsurer said it expects cyber to remain one of the fastest growing sub-sectors of the global insurance market, but noted that cyber premium growth had slowed over the past two years.

It said that global cyber insurance premiums totalled $15.3 billion in 2024, representing less than 1% of global P&C premium volume.

The reinsurer expects the cyber market to expand at an average annual growth rate of more than 10% over the next five years.

North America remains the largest cyber insurance market by region with $10.6 billion of total premiums in 2024, representing 69% of global premiums.

Europe’s cyber premiums of $3.3 billion in 2024 represented a 21% share of the global total. Munich Re said the region had expanded at a compound annual growth rate of 26% since the start of the century.

The reinsurer said Europe and Asia/Oceania are expected to increase their shares of the global cyber market, with Europe expected to account for 24% of global premiums by 2027 and Asia/Oceania 8%.

Munich Re said large corporations continue to account for the majority of premiums, while small and medium-sized enterprises largely retain the risks.

Data breaches remained at a high level in 2024, with the average cost of a breach rising by 10% to an all-time high of $4.88 million, the report said.

Munich Re also reported a further increase in geopolitical adversaries using cyber as a means of targeting critical infrastructure, with energy, transport and telecommunications key target sectors.

Between January 2023 and January 2024, Munich Re said critical infrastructure worldwide was exposed to over 420 million attacks, an increase of 30% since 2022.

The reinsurer said that the insurance market offers reliable capacity for commercial and private cyber policies.

“Rate increases, which boosted growth particularly in 2021 and 2022, have now led to a period of stabilisation,” the report said. “However, the cyber insurance market is set to experience steady growth in the medium term, driven by the increasing digitisation of businesses across all segments, more frequent and severe cyber events, digital interdependencies and heavier regulation.”

ILS MARKET TO AID MARKET GROWTH

Some others have offered even more bullish forecasts for cyber market growth.

S&P Global Ratings late last year predicted annual cyber insurance premiums are likely to increase by 15 to 20 percent per year to around $23bn by the end of 2026.

In an interview with The Insurer in late March, S&P’s managing director in New York Ronald Joas and London-based credit analyst Charles-Marie Delpuech said that the rating agency expects the exponential growth of the segment to continue, aided by an increasingly sophisticated cyber catastrophe bond and ILS market.

They cited improved risk modelling, wider availability of cyber reinsurance and large-scale cyber events like CrowdStrike and WannaCry driving an expansion of capacity.

“We've seen a fair amount of growth on the primary side,” said Joas. “You have insurance companies that have been providing coverage in this area. They certainly started off fairly cautiously in terms of what coverages they were providing. That said, I think you can see that from a primary perspective, it's moving towards maybe greater comfort with providing those coverages.”

The rapid growth of the market has brought challenges. The increasing frequency of cyberattacks is expected to continue, particularly with the adoption of AI technologies, and such risks are notoriously difficult to model compared with other perils as they are caused by threat actors with unpredictable behaviour and intentions.

Rapid cyber premiums growth also created the need for insurers to syndicate their cyber risk beyond traditional reinsurance, leading to the establishment of the cyber catastrophe bond market over the last couple of years. Since January 2023, there have been 10 cyber cat bonds issued from five cedants which raised a combined $800 million, according to S&P.

“It's evolving into the financial markets,” said Joas. “This is another way of providing that reinsurance capacity, and in a way that provides a scalable capital base.

“Cyber risk is not going to go away. If anything, it's going to increase exponentially over the coming years.”

The sustained growth and evolution of cyber reinsurance is critical to smoothing the rapid growth of the market over the years and servicing the needs of both carriers and customers.

“For the market to grow, you need the reinsurance market to grow,” said Delpuech. “More than 50% of the cyber insurance premium is reinsured. So, you need the reinsurance to grow. At the same time, ILS will provide this capacity as well. It’s a very symbiotic relationship.”

As well as reinsurance capacity, improved risk modelling and data disclosure is also critical for laying the foundations for the cyber market’s growth in the coming years as it will enable investors to become more comfortable with the opaque nature of cyber risks.