Cyber insurance plays a critical role in protecting against cyber risks. The cyber insurance market has grown significantly, especially over the past decade, and upward momentum in the market is expected to remain strong. But maintaining the pace of expansion will require attracting additional capital to manage ever more extreme and complex cyber risks.
This report examines the potential of alternative risk transfer (ART) solutions, including insurance-linked securities (ILS) such as cyber catastrophe bonds, to facilitate broader distribution of these risks to financial markets.
Participation in the cyber ILS market is increasing, but the uncertainties surrounding large-scale cyber exposures, variations in insurance policy language, and liquidity and diversification concerns currently hinder investor appetite. The report outlines ways to address these challenges to foster a more robust cyber ILS market:
More standardised cyber re/insurance contracts to improve clarity and transparency.
Advanced risk quantification and modelling techniques for cyber to reduce uncertainty.
More granular re/insurance coverage that better matches investor risk preferences.
