Cyber Insurance Poised for Global Expansion, Driven by Innovation

Howden has released its fourth annual cyber report, "Risk, Resilience and Relevance," highlighting the stabilizing cyber-insurance market and its potential for significant growth. After a major market correction driven by rising ransomware claims in 2020 and 2021, conditions began to stabilize in 2023 due to improved cyber-security practices among insureds, which helped to prevent or mitigate the impact of attacks.  The report indicates a 15 percent reduction in pricing from 2022's peak, presenting an opportunity for buyers to secure protection on favorable terms.  

Sarah Neild, head of UK cyber retail, Howden, said, "Favorable dynamics have persisted into 2024, with the cost of cyber insurance continuing to fall despite ongoing attacks, heightened geopolitical instability, and the proliferation of generative AI. At no other point has the market experienced the current mix of conditions: a heightened threat landscape combined with a stable insurance market underpinned by robust risk controls. The foundations for a mature cyber market, with innovation and exposure-led growth at its core, are now in place."  

The report identifies two key growth opportunities: expansion beyond the United States and targeting small and medium-sized enterprises (SMEs). Currently, the United States accounts for about two-thirds of the global cyber insurance market. However, more than half of the projected premium growth up to 2030 is expected to come from outside of the United States. Major European economies like Germany, France, Italy, and Spain have significant potential for premium growth.  

Jean Bayon de La Tour, head of cyber, international, Howden, said, "Cyber insurance is key to strengthening resilience around the world, and insurers are now in a strong position to bring about real change. This involves providing more capacity to meet pent-up demand in currently underpenetrated regions, including Europe, Latin America, and Asia.... The potential for growth is huge, particularly as most of these countries are coming off such a low base."  

The report also finds that the SME sector, which accounts for nearly half of GDP in advanced economies, represents a significant growth opportunity. 

Strengthened cyber resilience is paying dividends for policyholders as ransomware attacks continue to rise, according to the report. Data shows an 18 percent increase in attack frequency this year compared to 2023, but fewer companies are being forced to pay ransoms due to more effective risk controls. Despite concerns about systemic risk, recent data indicates that indirect claims from third parties have been lower on average compared to direct claims. This suggests that the scale of cyber events would need to be significantly larger to threaten the premium base of the global market.  

Prospects for the cyber-insurance market remain strong, supported by a growing and diverse capital base. Maintaining capital inflows will be crucial as the market expands to meet the increasing demands of businesses worldwide, according to the report.