By Michael Loney

Feb 13 - (The Insurer) - Global cyber market premiums grew to around $16.6 billion in 2024 with the bulk of business continuing to originate from North America, according to a report by Guy Carpenter.

The reinsurance intermediary said that while North American carriers account for a significant proportion of global premiums, there has been a notable surge in growth in both Europe and Asia.

“After very large compound rate increases in 2021 and 2022, the market has stabilised while experiencing modest softening in certain areas. Rates flattened or decreased in 2023, continuing to adjust throughout 2024,” the report said.

This has culminated in the expansion of the market to $16.6 billion in 2024, with North America making up the majority at $10.5 billion (63.4%), Europe at $3.9 billion (23.6%), APAC at $1.7 billion (10.0%) and the rest of the world at $500 million (2.9%).

“New growth to the industry is being driven by under-penetrated industry segments, developing regions and new products,” the report said.

Although it remains the largest contributor, Guy Carpenter said that the growth rate for U.S. cyber premiums slowed in 2024. It said this reduced growth reflected the market closing in on its full potential rather than any reduction in appetite or capacity.

Penetration into smaller-revenue bands, emerging industry sectors and personal lines business could be significant drivers of future North American growth, Guy Carpenter said.

In the European market, the Marsh McLennan-owned intermediary said prices decreased and availability of cover increased as the entrance of insurtechs drove greater competitiveness.

Market growth has been most acutely seen in the large-risk segment, which Guy Carpenter said was a result of business continuity becoming increasingly dependent on cyber infrastructure.

Proposed EU regulation and a year-on-year increase of 50% in GDPR fines mean cyber exposures remain in the spotlight, although purchasing motivations continue to be driven by first-party risk concerns.

Marsh’s global rate index showed cyber insurance rate decreases had accelerated to 7% in the fourth quarter of 2024, with declines continuing in every region.

In the U.S., cyber rates decreased by 5%, while European cyber rates decreased by 14%.

LOW ASIA PENETRATION BUT TAKE-UP INCREASING

Although Guy Carpenter said the Pacific cyber market is “a relatively mature product”, insurance penetration in Asia is estimated to be as low as 4% to 7%.

“Cyber take-up for SMEs in Asia is currently low but rapidly increasing, representing the highest growth rate,” said Guy Carpenter.

Due to the relative lack of experience with cyber products in Asia, underwriters have demanded strong risk controls from clients in order to access coverage, with particular focus on ransomware due to its frequency.

Guy Carpenter said insurers have been willing to expand their regional coverage offering as recent rate reductions and increased capacity have made it a favourable environment for buyers.

Marsh said Asia cyber rates decreased by 11% in the fourth quarter, while the Pacific saw quarterly decreases of 8%.

LATAM AND THE MIDDLE EAST

Cyber take-up rates in Latin America and the Middle East have also been slowly rising, with growing appetite among carriers to diversify their books into these territories.

This growing interest has also been supported by government initiatives to build digital infrastructure.

These include the International Finance Cooperation’s desire to invest in data centre infrastructure in Latin America, as well as the Gulf Cooperation Council’s strategic lean into digital infrastructure and high-tech industries.

But Guy Carpenter said the promise of these initiatives has been challenged by a lack of standardisation in these markets, which can make purchasing cover more costly for buyers.

MODELLED 1-IN-200-YEAR AGGREGATION LOSS $20 BILLION TO $46 BILLION

Guy Carpenter also said in the report that, alongside this growth, the reinsurance broker is investigating the aggregation potential these regions present through its vendor model partners.

“We see that divergence between models is partly driven by differences in interpretation of cyber events and how these can materialise,” the report said.

“The modelled global aggregation loss potential for the industry varies from $20 billion to $46 billion for 2024 at the 1-in-200-year return period (RP), leading to a market loss ratio between 120% to 277%."