As the cyber market continues to expand-the market has doubled in global gross written premiums from $8bn in 2020 to $16bn today-insurers are increasingly seeking efficient ways to protect against extreme cyber tail events, according to a new white paper by Gallagher Re.
Titled "Cyber and Property Combined Covers: Buying the Tail More Efficiently", the white paper highlights how combining cyber tail risk with uncorrelated property catastrophe risk can reduce pricing and improve efficiency for cedants.
The findings demonstrate that combining cyber tail risk with property catastrophe risk in shared-limit structures can lead to materially lower pricing. This is achieved through reduced capital requirements, diversification benefits, and lower risk loads.
The paper also highlights the growing role of the insurance-linked securities (ILS) and cyber catastrophe bond markets in diversifying the capital base and supporting the increasing demand for cyber tail protection.
Gallagher Re Global Head of Cyber Ian Newman commented, “As the cyber insurance market continues to grow, insurers are facing increasing challenges in managing their exposure to extreme tail risks. By leveraging diversification benefits and exploring opportunities in the ILS market, we can help our clients navigate this evolving landscape and build resilience for the future.”