Larger carriers assume a disproportionate amount of nat cat risk compared with cyber, despite the fact that nat cat historically produces more significant losses – both in economic and insured terms. By contrast, cedents with relatively smaller balance sheets are often markedly more exposed to cyber as a percentage of business mix, with several establishing themselves as leaders in this rapidly evolving market.

This is amongst the findings of a report published by Howden Re, whose analysis of the cyber re/insurance landscape suggests that the consistent undercurrent of perceived imminent digital disaster overshadows a realm of untapped potential.

The report urges a shift towards a more balanced view of risk between cyber versus other classes of business. It suggests a more nuanced approach to cyber exposure management is needed, with data indicating that the industry could, and should, bear more cyber risk than it currently does.

Luke Foord-Kelcey, global head of cyber, Howden Re, commented: “Cyber risks consistently top the rankings of risk managers’ concerns. To stay relevant to those buyers of insurance, as an industry it is imperative that we embrace this class of business. This report identifies how carriers may assess their appetite for the cyber class of business to ensure they recognise the extent of the opportunities within the context of a more thorough understanding of the risks.”

The report concludes that with continued investment in expertise, modelling and analytics, re/insurers can expect a more favourable and diversified risk-return profile from cyber reinsurance underwriting.

David Flandro, head of industry analysis and strategic advisory, Howden Re, added: “The maturing of the cyber market necessitates a thoughtful recalibration of how cyber risks are underwritten. A transition is necessary: from viewing cyber threats through a catastrophic lens, and instead recognising the competitive advantage that can be gained through more nuanced and informed risk analysis.”

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