Think tank the Geneva Association has warned (re)insurers not to presume that demand for cyber coverage will continue to grow at current rates.
In its most recent report, the Geneva Association said that while the cyber insurance market had grown year-on-year – both in terms of premium volume and coverage – carriers must adapt to ensure products reflected the evolving risk landscape.
“Although cyber risk premiums have expanded sizeably in recent years and loss ratios compare favourably relative to other product lines, sustainable growth of the cyber insurance market should not be taken for granted,” Daniel Hofmann, senior advisor insurance economics at the Geneva Association said.
In order for the cyber insurance market to continue to grow at a sustainable level, the think tank said insurers must make “an acceptable return on capital” through disciplined underwriting.
The Geneva Association added that this capital must be capable of withstanding shocks from accumulation events and provide adequate compensation to insureds after such events, including accumulation risks, which it said were the root of many concerns surrounding cyber risks.
The publication of the think tank’s study coincided with the release of a report by rating agency AM Best, also on the cyber market.
AM Best said that as the cyber market grows, it expects carriers to retain larger amounts of the peril.
It echoed the Geneva Association - saying it expects cyber risks to extend beyond the affirmative cyber insurance market - with silent cyber losses, directors and officers as well as errors and omissions policies expanding to provide coverage from an event caused by a cyber peril.
The ratings agency said insurers are also increasingly exposed to direct exposure from their own business operations - which are heavily dependent on IT systems.