Mining for growth: cyber industry should dig deeper

Gallagher Re’s international head of cyber Jennifer Braney implores the cyber industry to dig deeper when it comes to searching for profitable growth.

Key points
Take supply to where demand will be
Brokers connect supply to demand
Growth outside US needs creativity and flexibility 

While some cyber carriers are still “panning for gold” in their quest for growth, the market should be digging deep to mine a rich seam of international and alternative cyber product business. This approach, it is argued, best supports market growth and offers additional diversification benefits.

We like the analogy of gold mining. Prospectors panning for gold in a stream might discover nuggets easily, but eventually those will run out. To find more substantial gold deposits, you must dig underground, which is harder and requires more time and creativity.

As Gallagher Re explored in a whitepaper released in March this year, the cyber insurance market is uniquely positioned for robust growth.

“Cyber insurers should look to emerging markets for growth.” 

While corporate risks will continue to be a mainstay of the business, with US buyers providing an estimated two thirds of the global market, opportunities are emerging in international markets. SME cyber business is growing in some less-established European markets, Africa, Latin America and Asia-Pacific (APAC). Meanwhile, personal lines coverage is taking off in Europe and APAC.

Cyber insurers should, therefore, look to these emerging markets for growth rather than competing for the same pool of business in established markets. However, because international distribution is less developed than in core markets, insurers will need to direct capacity to where demand is growing.

“The cyber market needs to take the supply of capacity and capability to where demand will be,” noted Braney, head of international cyber.

Diversification benefits

Although ransomware is a global threat, tactics and actors vary by region. For example, the recent UK retail attacks focused on a specific industry and region. “A geographically diverse cyber portfolio helps balance out regional or sector-specific threats. Diversification is not a new concept in reinsurance, and there is a growing argument for its application in cyber, which is generally viewed as an undiversifiable global risk,” said Braney.

Some regions exclude ransom payments from cyber insurance, while the governments of some countries discourage or ban the payment of ransoms for certain sectors.1 This could provide a diversification benefit to help manage ransomware risk, where it dissuades attackers from targeting those regions.

“Diversification is not a new concept in reinsurance, and there is a growing argument for its application in cyber.”

Alternative cyber products can also provide diversification benefits through coverage differences. As Braney explains: “Personal lines cyber insurance naturally doesn’t cover business interruption, which has been a bigger driver of loss in ransomware claims. Adding personal lines cyber insurance to a portfolio can aid in diversification in that respect.”

Tapping into growth

As international demand for SME and personal lines cyber products grows, Gallagher Re will continue to play an important role as a matchmaker.

As the market continues to grow and mature, the role of the reinsurance broker will be to connect the distribution network of local carriers – those with the reputation, brand presence and understanding of their jurisdictions – with global cyber capacity and capabilities.

“Uncovering the rich seams of new business that lies beneath the surface of international markets will be a challenging process. However, with persistence and effort, there are huge untapped opportunities waiting to be discovered,” she concludes.

Jennifer Braney is the international head of cyber at Gallagher Re. She can be contacted at:  jennifer_braney@gallagherre.com.

Sustainable cyber growth depends on balancing supply and demand, securing capital that remains committed even during downturns, and fostering underwriting strategies that evolve rather than contract in response to loss.

In March this year, Gallagher Re published a white paper, “The quest for growth” which noted that historically, the market’s response to major loss events has been reactive – pushing up rates and shrinking exposure.

At Gallagher Re, we are advocating for a different approach; growing market aggregates and increasing written premiums, rather than just adjusting rates.

To achieve this, underwriters must prepare now, during the softer cycle, to ensure they have the relevant trust and buy-in from stakeholders that leaning into a hard market is a viable strategy.

And, as the paper explains, history has shown that those who prioritised sustainable capital protection and embraced market volatility – rather than retreating – were ultimately rewarded.

However, it isn’t enough just to generate more capacity. It is also imperative that the whole market works together to increase demand. To read more please visit: The Quest for Growth

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