In its ‘Re-framing cyber risk: navigating threats and embracing opportunities’ report, the firm found that the rewards that are offered were usually underestimated relative to the exposure to a natural catastrophe.
“Cyber risks consistently top the rankings of risk managers’ concerns. To stay relevant to those buyers of insurance, as an industry it is imperative that we embrace this class of business,” said global head of cyber at Howden Re, Luke Foord-Kelcey.
“This report identifies how carriers may assess their appetite for the cyber class of business to ensure they recognise the extent of the opportunities within the context of a more thorough understanding of the risks.”
The report found that larger carriers had an amount of natural catastrophe risk that was disproportionate in comparison to cyber risk. Cedents that have a smaller balance sheet were more exposed to cyber as a percentage of business mix.
“The maturing of the cyber market necessitates a thoughtful recalibration of how cyber risks are underwritten. A transition is necessary: from viewing cyber threats through a catastrophic lens, and instead recognising the competitive advantage that can be gained through more nuanced and informed risk analysis,” said head of industry analysis and strategic advisory at Howden Re, David Flandro.
Through the report, Howden Re concluded that reinsurers will be able to have a more favourable and diversified risk-return profile from cyber reinsurance underwriting should there be a continuous investment in expertise, modeling, and analytics.
“Investing in cyber-specific expertise and leveraging refined risk models are key to navigating the complexities of cyber threats effectively,” said Foord-Kelcey.
“This approach will not only transform perceived vulnerabilities into competitive advantages, but also enable our clients to capitalize fully on the burgeoning opportunities in today’s digital landscape.”
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