Reinsurance market could soon transform into P/C and ‘heavyweight’ cyber (PC&C), predicts top broker
The global cyber reinsurance market will double in size every three years, ultimately becoming comparable in size to the property and casualty sectors by 2040, a new white paper from the global broker Gallagher Re has said.
If the cyber market continues to grow at its current pace, it will exceed either property catastrophe or casualty in terms of annual reinsurance premium within the next 20 years, triggering “market-shifting” changes that could see P&C transform into property, casualty & cyber (PC&C).
Gallagher’s whitepaper finds that the ongoing underwriting revolution in cyber, with the crunch in capacity against a backdrop of an unrelenting rise in demand, has led to a decoupling of premium and aggregate exposure.
The broker predicts a second wave of growth from 2023 with a jump in the class’ profitability stemming from decreasing loss ratios and loss mitigation through technology-led solutions.
The whitepaper foresees cyber’s future as an insurance ‘heavyweight’.
Gallagher’s projections suggest cyber reinsurance premium will exceed that of property cat in the decade beyond 2030 if insurers continue their heavy reliance on reinsurance, which at present holds true for approximately 50% of original cyber premiums.
Ian Newman (pictured), global head of cyber at Gallagher Re, explained: “We anticipate market-shifting changes to occur as Cyber reinsurance outpaces Property CAT – with Cyber ultimately becoming the most-purchased type of cover globally by individuals, SMEs and large enterprises.
“For example, we predict the majority of Motor premium will become part of the Cyber market, as Motor insurance transforms into a technology warranty for owners of large fleets. Aviation and Marine will see similar shifts.”
“We expect this convergence of technology solutions, Cyber-Security techniques, and (re)insurance to create a virtuous cycle,” Newman said. “Investors will seek to protect their invested capital and Cyber will become the model class for product innovation and diverse distribution.”
“We’ll just have to wait 20 years to find out,” he concluded.
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