Cyber Insurance Industry Sector: Supply Chain Vulnerabilities, Accumulation, Governmental Cyber Protection, and Market Trends

As the global economy becomes increasingly dependent on digital services, supply chains, and software, the risk of cyber-attacks continues to rise. According to a recent study by the World Economic Forum (WEF 2024), 41% of companies surveyed have been affected by a third-party cyber incident.

Supply Chain Vulnerabilities

The supply chain has become an Achilles’ heel for organizations, with hackers targeting small and medium-sized suppliers in hopes of later gaining access to larger customers’ systems. The expected rise in costs incurred by businesses globally due to software supply chain attacks is estimated to grow from US$46bn in 2023 to US$60bn in 2025 (Juniper Research).

Accumulation

To secure and allocate sufficient capacity for coverage, accumulation exposure must be adequately controlled. Risk models inform a healthy risk appetite for insurers, which requires accurate modelling of potential catastrophic systemic cyber events.

• Munich Re invests in initiatives and resources to deepen understanding of aggregate cyber exposure and advance risk modelling.
• The company’s multidisciplinary cyber expert teams are at the core of its activities.

Governmental Cyber Protection

While the insurance industry has helped build an effective layer of resilience, its risk- bearing capacity has natural limitations. Catastrophic systemic events like cyber war or outage of critical infrastructure would far exceed the industry’s capacity. Societies need governmental involvement to manage these potentially catastrophic risks.

• Munich Re supports the development of solutions and advocates for the implementation of economic cyber protection as a precautionary measure of last resort.
• The company is prepared to help governments jointly manage these systemic risks for our societies by seeking alternative solutions.

Cyber Insurance Market Trends

The global cyber insurance market has reached US$14bn in 2023 and is estimated to increase to around US$29bn by 2027. Driven by awareness of increasing frequency and sophistication of cyber-attacks, stricter regulatory requirements, and digital transformation, the market is showing significant growth potential.

• However, only a fraction of cyber risks have been insured, with large companies accounting for the majority of premiums.
• Insurers face a major challenge in closing the gap between economic losses and insured losses.

Industry Insights

“Despite the challenges we face, I remain confident that the insurance industry will play a crucial role in mitigating these risks,” said Jürgen Reinhart, Chief Underwriter Cyber at Munich Re. “We are committed to addressing the growing demand from our cedents and insureds as a relevant partner.”

The cyber insurance market has almost tripled in size over the past five years, driven by the strong commitment of reinsurers and recent interest shown by the capital markets in cyber risks.

As the industry continues to evolve, Munich Re remains committed to addressing the growing demand for cyber insurance solutions that are sufficient, sustainable, and relevant to the resilience of the economy and society.