Cyber insurance is set for exponential growth over the coming decade but it remains a capital-intensive peril that requires structural innovation, according to analytics provider CyberCube.

In a new report based on CyberCube’s cyber risk aggregation tool, Portfolio Manager, the mid-range projection suggests that the US standalone cyber insurance market could reach US$45bn in premium by 2034, representing a five-fold increase from today.

The report suggests that cyber insurance is projected to grow rapidly, driven by increasing digitisation of the global economy and rising concerns about cyber risk. However, it also warns that cyber will become a peak peril, with the potential for losses from US standalone cyber to exceed Hurricane Katrina – the largest insurable natural catastrophe to date, costing the re/insurance industry US$102bn in 2005. At 20% CAGR, the amount of capital required to manage a 1-in-250 year loss would be US$121bn.

CyberCube says the cyber re/insurance market will need to substantially increase capital to enable this growth potential, with increases needed from multiple sources including insurers, reinsurers, capital markets, and potentially private-public partnerships.

Alex Tenenbaum, director of services and lead author of the report, said: “The cyber insurance market is set for outsized growth compared with other lines of P&C insurance over the coming 10 years. Structural changes are required to support sustainable growth.

“Some of these changes are starting to emerge and will require fuel to accelerate their growth – for example, penetration into the small business space and the emergence of the cyber insurance-linked securities market. Some are still very much in their infancy and will require broader market collaboration to unlock, such as public-private partnerships that work for both sides.”

Rebecca Bole, head of industry engagement, added: “The property & casualty insurance sector stands at the threshold of a once-in-a-generation opportunity to build a sustainable market for cyber risk transfer. This enables societal resilience to one of the peak risks facing economies today.”

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