Reinsurers can strengthen cyber market: Standard & Poor’s

Insurers will continue to increase cyber insurance rates and adjust terms and conditions, particularly exclusions, and reinsurers can support market growth, Standard & Poor’s Corp. said Wednesday in a report.

“The market would benefit from the development of a comprehensive retrocession market, and the use of (insurance linked securities) or alternative capital to improve capacity, according to the report, Cyber Risks in a New Era: Reinsurers Could Unlock the Cyber Insurance Market.

“The market faces increasing demand, but limited supply,” and the “lack of capacity could be holding back the development of a sustainable, cyber re/insurance market,” S&P said in the report.

“The dynamic change in claims pattern, rise of cyber threats, and huge accumulation risk creates an opportunity for larger reinsurance capacity,” S&P said.

“The number of reinsurers and insurers offering cyber coverage is rising in response.  But with such a new segment, we think it is important for reinsurers to offer primary insurers support managing the underwriting and risk management processes for cyber, as they do for natural catastrophe exposures,” S&P said.

Reinsurers’ support has become critical in helping primary insurers “manage cyber risk efficiently, strengthen their cyber risk resilience, perform cyber risk assessments, conduct a cyber defense strategy, and continuously monitor for upcoming cyber vulnerabilities,” the report noted.

As risk consultants, reinsurers can help primary insurers design products and improve their underwriting processes, it said.