Summary
The CyberCube Cyber Predictions 2024 webinar provided an in-depth discussion about the key trends and predictions shaping the cyber insurance market for the coming year. Moderated by Yvette Essen, Head of Content, Communications, and Creative at CyberCube, the session featured insights from a diverse panel of industry experts, including Christopher Schaer, Vice President and Head of North American Cyber at Odyssey Reinsurance, Rory Egan, Head of Cyber Analytics at Aon Reinsurance Solutions, and William Finley, Senior Cyber Underwriter at QBE Insurance.
Overview of Cyber Predictions
Each year, CyberCube publishes a Cyber Predictions report, which draws on the expertise of a wide range of professionals across various domains, including data science, threat intelligence, actuarial science, software engineering, and insurance. The report touches on a broad spectrum of topics, including market growth, regulatory developments, cyber model advancements, and the insurance-linked securities (ILS) market.
The webinar aimed to build on the research published at the end of 2023, focusing not only on CyberCube's predictions but also incorporating insights from industry leaders. The panelists were invited to share their predictions for 2024 and discuss the challenges and opportunities facing the cyber insurance market.
Key Predictions for 2024
Christopher Schafer (Odyssey Reinsurance) Christopher predicted that 2024 would be the "year of event covers" at the reinsurance level, with an increased focus on event-driven policies in various forms, such as insurance-linked securities (ILS), per occurrence, and catastrophe bonds. He emphasized that this trend had already begun and would likely continue throughout the year.
Rory Egan (Aon Reinsurance Solutions) Rory's prediction centered on a return to underwriting discipline within the market. He pointed out that recent years had seen strong performance, but with claims potentially increasing in frequency and severity, there was a need for more rigorous underwriting practices. Rory expressed concerns that while rates had started to come down, disciplined underwriting would be critical to maintaining market stability.
William Finley (QBE Insurance) William echoed Rory's concerns, noting that the frequency of cyber incidents, particularly ransomware and business email compromise, had been increasing. He anticipated that this trend would continue and that the broader cyber ecosystem would see a ripple effect in the insurance market as a result.
Market Growth and Challenges
The panelists also discussed the growth trajectory of the cyber insurance market. Rory highlighted the significant expansion of the market in recent years, noting that gross written premium had grown from around $2 billion in 2015 to approximately $15 billion by the end of 2023. However, he cautioned that while growth would likely continue, it might moderate in 2024. Future growth would need to come from new markets such as China and India, as well as from new products like personal line cyber and microinsurance.
William pointed out that market penetration rates were still relatively low, particularly in the UK and internationally, where penetration hovered around 15% for larger companies. He agreed with Rory that growth would not come from rate increases but rather from new entrants to the market and the introduction of cyber insurance to previously untapped sectors.
Christopher added that in the U.S., there was an increasing demand for higher limits, with insureds seeking $15 million limits instead of $10 million, and $10 million limits instead of $5 million. He also echoed the sentiment that future growth would be driven by new segments, geographies, and products, rather than by rate increases.
Rates and the Hardening Market
The discussion then turned to the topic of rates and the recent renewal season. Rory noted that in 2021, the primary cyber insurance market saw rate increases of around 50%, followed by slightly lower increases in 2022. However, in 2023, the market saw a reversal, with rates decreasing by an average of 5%. Looking ahead to 2024, expectations were for a relatively flat market, with some segments seeing rates come off more significantly than others.
Christopher observed that there were regional differences in rate trends, with the U.S. market experiencing more negative rate changes, while international markets, particularly in Asia, had seen positive rate changes. He emphasized the need for reinsurers to remain responsive to the changing needs of their clients and to provide capacity that aligns with those needs.
The Role of Insurance-Linked Securities (ILS)
The development of the ILS market in 2023 and the first quarter of 2024 was another area of focus during the webinar. Rory noted that the introduction of publicly tradable cyber catastrophe bonds had been a significant development, with at least four such bonds coming to market in late 2023. He emphasized the importance of educating investors and unlocking new capital to support the continued growth of the ILS market.
Christopher agreed that education was key, particularly in terms of aligning the wording of contracts with the intent of the parties involved. He stressed the need for transparency and collaboration between insurers, reinsurers, and ILS investors to ensure the continued development of this market.
Claims Trends and the Impact of AI
The panelists also touched on the potential impact of artificial intelligence (AI) on claims frequency and severity. Christopher noted that AI could serve as an enabler for cybercriminals, lowering the barrier to entry for certain types of attacks, such as phishing and ransomware. However, he also pointed out that AI could be used to improve defenses, with AI-driven threat intelligence tools helping to identify and mitigate risks.
William added that while AI could increase the frequency of attacks, it also had the potential to improve the efficiency of cybersecurity defenses. He emphasized that the industry needed to stay vigilant and adapt to the evolving threat landscape.
Conclusion
The CyberCube Cyber Predictions 2024 webinar provided a comprehensive overview of the key trends and challenges facing the cyber insurance market. The panelists highlighted the importance of underwriting discipline, the continued growth of the market, and the development of the ILS sector as critical factors for success in 2024. Additionally, the impact of AI on both cyber risks and defenses was acknowledged as a significant area to watch.
As the market continues to evolve, collaboration and innovation will be essential to navigating the challenges ahead and ensuring the long-term sustainability of the cyber insurance industry.