Howden Re Outlook at 1.1: Cyber

Reinsurance buyers benefitted from improved supply and demand dynamics in 2024, driven by an oversupply of capacity, reduced demand and manageable large losses. Furthermore, nine new reinsurers entered the market for 1 January 2025, including seven established carriers and two balance sheet start-ups, adding ~US$250 million of capacity.

“A slew of systemic events in 2024, like Change Healthcare, CDK and a global IT outage, all proved to be manageable on the loss front and had little impact on renewals,” said Luke Foord-Kelcey, Global Head of Cyber, Managing Director, Howden Re.

These events did however prompt reinsurers to ask additional questions of cedents on how contingent business interruption and systems failure cover are being underwritten. Some markets have also asked for further data on where these covers are being provided.

Growth in the global cyber insurance market slowed to approximately 5% of gross written premiums in 2024, compared to 26% CAGR recorded between 2018 and 2022, reflecting lower rates and high penetration in mature markets. For reasons of both improved diversification and growth potential, attention is turning to regions with lower take-up rates of the product, such as Central and Eastern Europe, the Middle East and South East Asia. However, increasing penetration will take time.

Against this backdrop reinsurance renewals at 1 January 2025 progressed smoothly, with a degree of price moderation.

“Reinsurers considered cedents on a case-by-case basis, with well-performing books achieving risk-adjusted rate reductions of up to 20% in the excess of loss market,” said Foord-Kelcey. For quota share programmes, which continue to be the structure of choice for most cedents, ceding commissions increased by a little more than one percentage point on (a weighted) average; however, there were notable variations, with increases of up to 5 percentage points in certain cases.

“Perhaps indicative of the market conditions, or maybe reflective of reinsurers’ greater confidence in their understanding of the class, we have seen greater willingness to offer risk excess of loss reinsurance products in support of cyber portfolios,” said Foord-Kelcey.

Given the ongoing focus on systemic events, an increasing proportion of cedents shifted from proportional to non-proportional products more attuned for tail protection. Reinsurers matched this demand with appetite to write more event structures and, to a lesser extent, more risk XL covers. As a corollary they asked for increased data transparency into systemic exposures. All of which translates into an increasingly mature and efficient marketplace.

Read Howden’s full 1.1. 25 renewals report, “Past the Pricing Peak” here