Lockton Re urges cyber re/insurance to invest for growth by 2030

Lockton Re launched its latest study, “Cyber Insurance 2030: Charting a Course for Growth”, at the Monte Carlo Rendez-Vous on 9 September, setting out the conditions needed for the sector to achieve long-term expansion.

Oliver Brew, who recently moved into the newly created role of head of cyber centre of excellence at Lockton Re, co-authored the report.

He said even conservative growth projections pointed to “profound implications for both the cyber re/insurance market itself and the wider industry.”

Brew stressed the importance of looking past simple numerical projections. “There is inherent uncertainty in any projection of market growth, so, rather than simply adding numerical estimates to the market projection, we have looked beyond the numbers to examine the conditions necessary to meet such expectations,” he said.

Brian Lewis, cyber practice leader for North America and co-author, said the sector had reasons for optimism but also clear hurdles to overcome.

“The cyber market can draw lessons from experience in other classes, and with the amplifying impact of dramatically improved computational power, there are many reasons for continued optimism for the long-term robust health of the cyber insurance industry,” Lewis said.

“However, as an industry we need to identify a roadmap of priorities for the cyber re/insurance industry and meeting growth expectations will be challenging without investment in several areas.”

Roadmap for cyber growth

The report highlights three main areas in need of greater attention:

• Improved data quality, with better tools to understand portfolio risk and reduce uncertainty.

• Continued modelling investment, as granular risk models are essential to mitigate systemic threats and attract capital.

• Flexible product design, to adapt to the diverse needs of buyers, particularly SMEs where take-up remains low.

Brew said the limited number of cyber catastrophe events to date left uncertainty over how systemic losses could unfold.

“One of the inescapable facts of the cyber insurance market is that there have only been a handful of true cyber catastrophe events where single incidents have led to multiple impacted parties,” he said.

“As a result, there are limited data points to understand how a technology incident would affect multiple companies simultaneously.

“Much research has been conducted on this, but, inevitably, there is an element of conjecture about how exactly this could manifest. Our call for investment in data quality, modelling investment and a flexible approach to product offering will really help the cyber market to reach its potential and service clients large and small effectively.”