Cyber GWP rises to $15.85 billion with ample room for growth: Howden Re

By Michael Jones

April 29 - (The Insurer) - Increasing reinsurance and retrocession capacity serve as an indicator of the ample room for growth in the maturing cyber (re)insurance market, Howden Re said in a report on Tuesday.

The reinsurance broker estimated total cyber market gross written premium at $15.85 billion, of which 36% is ceded to the global reinsurance market.

Howden Re said competition was intensifying in the cyber reinsurance market, with 62 reinsurers actively writing standalone cyber reinsurance.

But the market is still developing, the broker said, with the top five cyber reinsurers accounting for 62% of market GWP, while the top 10 account for 87%.

Howden Re said this concentration among a limited pool of reinsurers could challenge future growth.

Of the 36% of global cyber insurance premiums ceded to the reinsurance market, Howden Re said 32% is through proportional structures and 4% is through non-proportional structures.

The broker said there has been a "steady decrease" in quota share cessions as carriers have turned to non-proportional products to protect against systemic risk.

It said that average quota share cessions have come down from 57% five years ago to 45% today, with the reduction gaining momentum after the uptick in ransomware and subsequent rate hardening in 2021 and 2022.

Carriers are focusing reinsurance spend on tail-risk protection rather than broad-based capital relief, Howden Re said. This has combined with a softening in the non-proportional market that has made structures more cost-effective.

The report said that if the market reached $30 billion in GWP, and current trends continued, the quota share market would see only one-quarter of total premiums ceded through it.

Howden Re estimated that the non-proportional market would grow steadily to 6.5% of ceded reinsurance premiums, primarily driven by event products.

It said the most notable difference between the current market and this hypothetical $30 billion market would be a more developed retrocession market.