Over time, capital market investors are expected to play an important role as a key element in ensuring there is sufficient cyber reinsurance and retrocession capacity, to support the expansion of cyber insurance limit around the globe, Moody’s Ratings has said.
In addition, the cyber industry loss warranty (ILW) is also highlighted as a tool that can support cyber insurers and reinsurers growth ambitions.
Cyber insurers have shifted their reinsurance strategies, but remain cautious on systemic and aggregation risks in the class, the rating agency said.
“As cyber insurers become more comfortable managing attritional losses, many are considering purchasing excess of loss contracts, rather than relying solely on traditional quota share arrangements, which typically contain a loss ratio cap.
“Given the market’s potential exposure to systemic and aggregation risks, cyber insurers and catastrophe modelers continue to enhance their modeling capabilities.
“However, the market’s relatively short claims history and the evolving nature of risks make it difficult to predict the frequency and magnitude of tail risks,” it further stated.
According to Moody’s Reinsurance Buyers’ Survey, 37% of primary insurers responded by saying they are very likely to buy excess of loss cyber coverage, compared with just 8% in the same survey a year ago.
While there have not been any new cyber catastrophe bonds issued in 2025 so far, this is a function of a competitive reinsurance market where rates-on-line have fallen, the fact cyber risk models remain nascent and confidence is still building in them, as well as the fact the cyber insurance market remains concentrated.
Due to that concentration there are really only a handful of companies large enough in the space to sponsor cyber catastrophe bonds at this time.
As a result, the growth of cyber ILS and cat bonds may be slower than many had hoped for, but still the capital markets is expected to be an important source of reinsurance and retrocession over time, for the cyber market.
“Over the long term, the participation of capital market investors in bearing some of these risks will be a key element in ensuring sufficient reinsurance/retrocessional capacity and spread of risk to support traditional writers,” Moody’s explained.
