Cyber Reinsurance Growth Picks Up Speed
The cyber (re)insurance market is on the rise. Capacity and innovation have grown after hard market years in 2021–2022. According to Howden Re’s 2025 “Into the Cyberverse” report, confidence is returning. Non-proportional coverage is replacing traditional quota share deals. Buyers now focus on protecting against catastrophic tail risk, not just capital relief.
Mapping the Market: Who Holds the Risk?
A visual deep dive shows $15.85 billion in cyber insurance premiums. About 36% flows to reinsurers. However, only 7% gets retroceded. The market is diversifying, with aggregate and event covers gaining ground. Yet, five players control 62% of reinsurance premiums. This concentration threatens long-term market balance.
Changing Dynamics in Reinsurance Buying
Carriers are shedding quota share deals. Average cessions dropped from 57% to 45% in five years. Tail-focused protection is in demand. This shift benefits reinsurers, especially with loss-free non-proportional products.
Stress Testing the Ecosystem
Probabilistic and fixed attrition models were used to test risk movement. Results show reinsurers stay profitable longer. They carry more tail risk, especially in high-attrition years. But beyond certain thresholds, they, too, buckle.
Tail Risk: Not Just Theory
Historical cyber events like NotPetya or CrowdStrike don’t even hit a 1-in-10-year scenario. Despite this, reinsurers must prepare for worse. Fixed attrition scenarios show that insurers often recover less than expected from their covers.
Retrocession: The Next Frontier
As losses increase, reinsurers need to offload more risk. But retro capacity is tight. Non-proportional retrocession like cat bonds and ILWs must grow. Event-based products will be key.
Future-Proofing the Cyber Market
The report envisions a $30 billion market. Quota share will shrink further, and non-proportional risk will rise. Retrocession use may double. However, sustainable growth needs stronger models, more capital providers, and balanced reinsurer participation.
Market Headwinds and Needed Fixes
Three main barriers need attention:
- Concentration: The top 10 reinsurers dominate the market. New players must step in.
- Retrocession Shortage: More innovative structures like “hard retro” are required.
- Model Weakness: Cyber modeling lags behind property-cat markets. More investment in analytics is critical.
Conclusion: Seizing the Cyber Opportunity
The cyber (re)insurance market is maturing. But success depends on smarter purchasing, better models, and balanced risk-sharing. As more insurers adopt tailored reinsurance, the market’s ability to manage large-scale cyber events will improve. It’s a race against risk—and there’s no turning back.
Our Sometimes Feature – Explain it like I’m a 5th grader
Insurance, especially cyber insurance, is packed with complex terms and technical jargon that professionals understand but can confuse the rest of us. So, to help everyone grasp these important concepts, it’s useful to simplify the explanation – imagine explaining it to a fifth-grader.
Think of Howden Re’s Into the Cyberverse report like a giant game of musical chairs at a crowded birthday party. Imagine insurers, reinsurers, and retrocessionaires as party guests, circling nervously as cyber risks (the music) play unpredictably.
When the music suddenly stops due to an unexpected cyber catastrophe (think NotPetya or WannaCry), everyone scrambles for a chair, hoping their strategies (quota shares, non-proportional covers, aggregate excess-of-loss) give them a guaranteed spot and keep them from being the unlucky loser.
Just as guests debate whether hovering near a chair or dashing wildly around the circle is best, insurers and reinsurers continually reassess how much risk they hold or pass along, balancing safety and profit. The report suggests that to keep the party fun and avoid chaos, more chairs (retrocession capacity) are needed, alongside clearer rules (better modeling), ensuring that when the music inevitably halts, everyone knows exactly where to sit. And the person left standing can smile, walk away, able to play another day.
Other News: UK Cyber Insurance Market 2025: Why Businesses Must Act Now Against Rising Threats
