The world of cyber insurance is changing. Recently, experts have noted a growing interest in non-proportional risk transfer solutions, particularly those that address cyber catastrophe losses. These solutions focus on both individual events and broader risks, but they are still in the early stages of development.
One of the challenges in this area is the inconsistency in how these products are priced. Gallagher Re pointed out that differences in how events are defined and covered create confusion. Additionally, there are varying opinions on the risks involved, especially when it comes to rare but severe events. This situation is complicated by the lack of historical data on cyber losses and the fast-paced nature of the insurance market.
Since their introduction around 2015, aggregate stop-loss and aggregate excess of loss structures have become popular among cyber reinsurance buyers. These products offer a way to protect against significant losses, whether from ongoing issues like ransomware or from single catastrophic events. They provide a safety net for companies facing unusual loss trends or high-frequency events.
The aggregate market stands out as the most financially stable part of the non-proportional cyber reinsurance sector. It also shows the least variation in pricing among different insurance providers. This makes it a reliable option for establishing a standard pricing index for the industry.
As the landscape of cyber insurance continues to evolve, both insurers and businesses will need to adapt. The focus on these non-proportional solutions reflects a growing recognition of the unique risks posed by cyber threats. Companies are increasingly seeking ways to safeguard their assets against potential financial losses from cyber incidents.