These stories have increased since the start of the Ukraine crisis. The news flow is so persistent it can be difficult to take a step back and view the market with a more rational lens. LM Re benefits from a privileged “view from the top” of this unique market as we offer cyber reinsurance with a global approach.
The latest 1/1 renewals confirmed the hardening market environment for the cyber reinsurance sector. The days of downwards pricing competition and widening coverage are long gone; ransomware, increased frequency and severity, intense regulatory scrutiny on the Western world and an ever more sophisticated threat landscape have all contributed to this change.
Global reinsurers have witnessed significant U-turns in their clients’ underwriting strategies, with capacity contractions, reduction of average line sizes, unprecedented pricing increases, implementation of sub-limits and coverage restrictions.
Cyber carriers are also starting to look towards the reinsurance market for CAT risk transfer solutions; this constitutes a new challenge for reinsurers given that defining a cyber CAT event is a complex task, due to the dynamic nature of cyber risk. In addition the ongoing Ukraine crisis has brought another unpredicted global scenario, one that will have implications for the cyber market.
Carriers are currently reviewing their war exclusions clauses, to assess their exposure. If there is one element of certainty, it is that the current hardening market will be here for the foreseeable future, considering the geopolitical, macro-economic and inherent market factors.
Market stakeholders will need to adapt and innovate to be able to continue to offer significant risk-transfer solutions. Capital markets and governments will have a role to play in the cyber market, with Insurance-linked securities already being looked at as a possible alternative source of capital. As a leading player in the cyber reinsurance market, we will ensure that we remain relevant, not only to the market and our end clients, but more importantly to the global economy.