Cyber Risk: On the Edge of Insurability - 2023 Focus Series


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A geological fault runs through the risk landscape. On one side are risks that the private sector is willing to assume; on the other are risks that only governments can take on. The cyber insurance market today is located on the edge of insurability. The scale and imminence of catastrophe losses in the next few years will likely determine on which side of that fault line cyber risk ultimately falls.


The cyber insurance market has been growing at a scorching rate—more than 50% annually in the U.S.—since 2020. The main reason for this remarkable growth rate, far in excess of any other class of insurance, has been rate increases that the market judged necessary to address the spike in ransomware claims that began in 2019. Exposures have not risen at nearly the same rate—in fact, in 2021, many insurers were writing higher premiums on a narrower exposure base.



Table of Contents:


Executive Summary


1. Cyber's Supply and Demand Balance



  • Demand Side

  • Supply Side


2. Cyber Market Growth Potential



  • Why Insurance Markets Grow

  • Cyber Market Growth Projections

  • Is Exponential Cyber Market Growth in the Cards?


3. Scenario Analysis



  • Scenario Input #1: Cyber Catastrophe Losses

  • Cyber Scenario Input #2: Policy Tooling

  • Cyber Scenario Input #3: Cyber Catastrophe Modeling Confidence

  • Cyber Scenario Input #4: Self-insurance

  • International Growth Opportunities


4. Conclusion


Appendices


Introduction

Looking ahead, it is clear that insurers cannot rely on further rate increases to deliver the continuing market growth that many expect to see. (Beazley CEO Adrian Cox opined that cyber insurance was “priced pretty adequately” in an analysts’ conference call on March 2.) Growth will be sustained only if more people—many more people—buy cyber insurance.