Brokers are reporting increasing demand for cyber reinsurance in 2020, across the range of structures available in the market, the latest annual cyber insurance market survey from PartnerRe shows.
Bermuda headquartered reinsurance firm PartnerRe has surveyed the cyber insurance market in partnership with Advisen, speaking to 260 cyber insurance brokers and 190 cyber underwriters from across the globe.
The results of the survey suggest that understanding of cyber insurance coverage has improved dramatically in the last year, while consistency in terms of pricing and coverage offered has also improved.
At the same time, insureds are constantly requesting increased limits of coverage from their cyber insurers, suggesting that the market continues its trend of steady growth.
Managing potential aggregation risks in cyber underwriting is a key theme running throughout the survey results, with respondents saying that use of outside vendors to help them manage aggregation risks is expanding, while around 90% of the respondents said that aggregation management is a key determinant in cyber insurance underwriting and pricing decision making.
Rates are on the rise as well, with brokers reporting cyber insurance rate increases of between 5% and 10%.
But concerns on non-affirmative cyber risks featuring in specialty property policies persist, with 65% of underwriters citing this as still concerning.
As a result, work on wordings accelerates in cyber risk underwriting and many are trying to eradicate silent cyber through the use of robust terms and conditions.
With silent cyber still a concern, it is no surprise that business interruption coverage is still the most sought after cyber coverage and 68% of respondents put this in their top 3 sought out protections against cyber risk.
The reinsurance needs of the cyber insurance market continue to increase it seems, with PartnerRe’s survey highlighting continued and growing demand.
PartnerRe asked cyber reinsurance brokers whether they are seeing any notable increase in requests for various reinsurance structures, or whether they are noting increased cessions on existing reinsurance programs that they place.
Roughly half of the brokers surveyed said that yes, requests for reinsurance structures and reinsurance cessions are being seen to increase.
This growing need for cyber reinsurance seems to be across the board as well, with similar percentages seen in the responses across proportional and non-proportional reinsurance treaties including aggregate placements, as well as specific non-affirmative covers and overall higher cessions.
One of the reasons the insurance-linked securities (ILS) market has been perhaps slower than expected to embrace cyber risk is that demand for coverage has not been as significant as had perhaps been assumed a few years ago.
ILS capacity tends to find its way into new markets as capacity requirements emerge, where there is significant demand and alternative capital can augment the available traditional reinsurance or retrocession market capacity.
In cyber risks the market hasn’t really got to that stage yet, meaning cyber ILS activity has been minimal overall.
But with cyber reinsurance demand apparently on the rise, it bodes well for future demand of cyber ILS capacity as well, as the enormity of cyber exposure and the potential for significant financial losses, suggests a role for the capital market is assured in time.