The missing pieces for a sustainable cyber insurance market

If there were enough supply to meet the high demand, the cyber insurance market could be a goldmine. The relatively young market, now worth USD 10 billion in premium annually, is expected to grow by 25 percent a year over the next five years. But capital capacity is not keeping pace with rapidly soaring demand.

Swiss Re's Head Cyber Reinsurance, John Coletti, highlights how better data could solve an important part of the scarcity problem. "A major reason for sparse capacity is the inability to qualify exposure due to a lack of historical data", Coletti stated at the Swiss Re Media Day 2022 on 14 June in London. "Being able to quantify your exposure to a scenario that affects multiple insurers at one time is one of the most critical challenges we have”, he emphasised.

With insurers ceding up to half of cyber premiums to reinsurers, Swiss Re has a tremendous amount of data it can use. To leverage this potential, Swiss Re is building a Cyber Data Ocean. Based on this big database, automated modelling of accumulation risk scenarios enables a clearer view of a portfolio, as well as more accurate and faster prediction of vulnerabilities.

The expectation, of course, is that with new, more reliable models, insurers would become more comfortable taking on cyber risk and thus better meet the growing demand for cyber insurance.