Cyber Insurance Market Stabilizes Amid Persistent Threat Landscape

Howden’s fourth annual cyber report, "Risk, Resilience and Relevance," outlines the stabilization of the cyber insurance market following a period of significant upheaval. The report highlights the opportunities and challenges facing the industry as it navigates a complex threat landscape characterized by ongoing ransomware attacks, geopolitical instability, and the proliferation of generative AI (Gen AI).

Market Stabilization and Pricing Reductions
In 2021 and 2022, the cyber insurance market experienced a surge in ransomware claims, leading to a major market correction. Improved cyber hygiene among insureds has since helped to mitigate the impact of attacks, resulting in more stable market conditions in 2023 and 2024. Howden’s global pricing index indicates a 15% reduction in the cost of cyber insurance from the 2022 peak, offering buyers an opportunity to secure protection at favorable terms.

Sarah Neild, Head of Cyber Retail, UK at Howden, notes, "Favorable dynamics have persisted into 2024, with the cost of cyber insurance continuing to fall despite ongoing attacks, heightened geopolitical instability, and the proliferation of Gen AI. The market now enjoys a unique mix of conditions: a heightened threat landscape combined with a stable insurance market underpinned by robust risk controls."

Growth Opportunities: International Markets and SMEs
The report identifies significant growth opportunities outside the U.S. and within the small and medium-sized enterprise (SME) sector. Historically, the U.S. has dominated the cyber insurance market, accounting for approximately two-thirds of global premiums. However, research indicates that more than half of premium growth up to 2030 is likely to come from non-U.S. territories. Major European economies such as Germany, France, Italy, and Spain are poised for significant premium uplift if they can replicate penetration levels achieved in more mature markets, potentially adding hundreds of millions of euros.

Jean Bayon de La Tour, Head of Cyber, International at Howden, emphasizes, "Cyber insurance is key to strengthening resilience worldwide. Insurers are now in a strong position to meet the pent-up demand in underpenetrated regions, including Europe, Latin America, and Asia. The potential for growth is immense, particularly as these countries are starting from a low base."

The SME sector, which represents close to half of GDP in advanced economies, also presents a considerable opportunity. Brokers and insurers are developing better ways to serve this currently underserved demographic. Howden has launched a platform enabling SMEs to purchase up to USD 6 million in cyber coverage with minimal information required, reflecting the need for innovation in broking to capture this market.

Enhancing Resilience and Addressing Systemic Risks
The report underscores the importance of strengthened cyber resilience, which is yielding dividends for policyholders. While ransomware frequency has increased, recovery costs are also rising, though fewer companies are being forced to pay ransoms due to effective risk controls. This is crucial as systemic risks—such as attacks on single points of failure (SPoF)—continue to threaten multiple organizations.

Recent attacks, such as those involving MOVEit and Change Healthcare, highlight the potential for loss aggregation across sectors reliant on specific software and platforms. However, data shows that claims from indirect attacks have been lower on average compared to direct claims. Ensuring tailored and comprehensive cyber insurance cover with adequate limits is vital for managing these risks.

Leveraging Innovation for Growth
Innovation is essential for the cyber insurance market’s growth. The report highlights the role of AI in both enhancing and defending against cyber threats. Generative AI is expected to increase the frequency, severity, and aggregation of claims by improving the capabilities of threat actors. At the same time, AI-driven defenses are developing rapidly, offering powerful tools for threat detection and prevention.

Howden’s report calls for a new approach to broking, characterized by cycle-savvy, innovative, entrepreneurial strategies that leverage global talent. By fostering innovation and addressing security concerns in contracts, companies can better protect themselves and unlock the full potential of cyber insurance.

Conclusion
Howden’s 2024 cyber report presents a comprehensive overview of the current state and future prospects of the cyber insurance market. With stable market conditions, attractive pricing, and significant growth opportunities in international markets and the SME sector, the foundations for a mature and resilient cyber insurance market are now in place. The industry’s ability to innovate and adapt will be crucial in navigating the evolving threat landscape and meeting the growing demands of businesses worldwide.