After witnessing record growth in 2023, with global cyber insurance business volumes soaring, a similar trajectory is anticipated for 2024. This growth is attributed to both deeper penetration into established business sectors and uptake by emerging industries.

However, while the rating environment remains largely profitable, experts caution that the downside risk has escalated significantly. Factors contributing to this risk include the utilization of AI by cybercriminals, heightened threats of state-sponsored attacks, and exposure creep due to interconnected devices.

According to OAC’s non-life consulting team, despite intensifying competition, current rates are deemed sufficient to yield underwriting profits. Notably, recent exclusions for state-backed cyberattacks on standalone cyber policies have prompted some businesses to seek coverage elsewhere. Nevertheless, this shift has not substantially dampened the overall increase in premium volume.

Bharat Raj, Head of London Markets at OAC, said: “Cyber insurance remains an attractive market for incumbents and new capital and there is good opportunity for growth and underwriting profit.

“Engagement with your policyholders, coverholders and cedants is key to ensuring strong underwriting performance. Policyholders and cedants increasingly look to their insurance partners for expertise and advice for mitigating cyber risk in the first place. Working collaboratively generally pays dividends as it can help drive improvements in the claims experience and premium rates as policyholders appreciate the value-added services on offer.

“Actuaries and risk managers have a significant role to play given the current, rapidly shifting environment. The historical experience is likely to need adjustment to reflect changes in the general risk environment, coverage terms and the mix of sectors covered as this class evolves. 

“Actuaries and risk managers are uniquely placed to help insurers understand the downside risk and drivers of loss accumulation across the cyber portfolio. Various vendor models have emerged for cyber insurance but these are still at a nascent stage and have not yet reached the same maturity as natural catastrophe models. 

“Scenario analyses and actuarial deep dives are probably the best tools currently available for really getting to understand the tail risk.”