Howden Re’s Lynch: Cyber insurance market to skyrocket to ~$43bn by 2030

The cyber insurance market is set for a seismic shift, with premiums expected to surge to $43bn by 2030, according to Mark Lynch, head of cyber and analytics at Howden Re.

"We're looking at cyber premiums growing from $15bn now to $43bn by 2030," Lynch stated.

"This growth is driven by cyber becoming a primary purchase for most companies, and increasing penetration in regions such as Europe and APAC,” he said.

Lynch discussed the industry's challenges and opportunities, noting the necessity of understanding and managing cyber catastrophe risk.

"To grow to that scale, insurers must get a handle on catastrophe risk and integrate it into their risk tolerance frameworks," he explained.

Lynch was speaking to The Insurer TV at Howden Re’s cyber reinsurance summit for their clients, which was held at Ascot racecourse and coincided with the release of the reinsurance broker’s comprehensive report, ‘Re-framing cyber risk: navigating threats and embracing opportunities’.

The report from Howden Re underscores the gap between cybersecurity investments and cyber insurance premiums. "Companies are investing heavily in cybersecurity, but the insurance market needs to match this with adequate coverage," Lynch said.

He highlighted the changing perception of cyber risk due to geopolitical dynamics, especially since the war in Ukraine.

"There's been a sea change in awareness, with European and APAC markets recognising the overarching geopolitical risk of cyber threats," he said.

Lynch pointed out the role of the insurance market in driving improvements in cyber hygiene.

"The insurance market has been at the forefront of pushing for better cybersecurity controls within corporations," he noted. "Larger companies are integrating cyber insurance into their procurement protocols, creating a cascade effect for smaller entities."

Despite these positive trends, Lynch acknowledged potential recalibrations if growth doesn't meet expectations.

"We might need to recalibrate if we don't see expected growth by 2025. Understanding the cat risk in cyber is crucial, as it is starting to approach levels seen in natural catastrophe models," he said. "If we can get this right, we can unlock significant capacity."

Lynch also addressed the emergence of cyber catastrophe bonds as a vital new capital source.

"We need alternative capital to reach our $43bn goal. Currently, the top 10 cyber reinsurers provide 85 percent of capacity, which is unsustainable for future growth. Cat bonds will play a key role in bringing new capital into the market," he explained.

Reflecting on the event at Ascot, Lynch expressed optimism about its impact. "We're bringing the best minds in cyber together to tackle difficult issues. The cyber market has been thriving, but we need to strategise to overcome future headwinds," he concluded.

Watch the 7-minute interview with Howden Re’s Mark Lynch to hear more about how the cyber market can reach its full potential.