At Monte Carlo, reinsurers were cautious about expanding in cyber

All four of the big reinsurers are reaching the limits of their willingness to expand in cyber, judging from discussions at the Rendez-Vous de Septembre conference in Monte Carlo, the world's largest reinsurance event, which wrapped up on Wednesday.

Munich Re has the largest exposure to cyber at $1.4bn in annual premiums, a huge share of a market valued at around $10 bn overall. The company said it expects to lose market share as cyber continues to boom. Munich projects that the size of the market will double to €20bn in the next four years.

"At the end of the day, there's no insurer in the world in any line of business or segment with a 10% to 15% market share," said Torsten Jeworrek, who heads up Munich Re's reinsurance division.

Swiss Re writes less than half as much, at about €600m in premiums, while Hannover Re said it expects to write between €550m and €600m this year. Scor has the smallest exposure of the Big Four, describing it as "a couple of hundred million euros."

Swiss Re said it expects the cyber market to be as large as property insurance by 2040, a massive expansion if that forecast is correct. But the company also said prices would have to continue to rise before it would commit significantly more capital to the sector.

Hannover Re said it would keep its exposure to the sector broadly stable, part of a generally cautious approach across all lines of business at a time of high inflation, increasingly frequent natural disasters and geopolitical instability.

"We're not further increasing our risk appetite across the business in general," said Silke Sehm, a board member at Hannover.

Scor, which already does the least cyber business of the Big Four, sounded most conservative. The company said it would not increase its current exposure in the near future.

"I think the issue we have is we're reaching, even with our small penetration, a level of perceived risk that is our risk appetite," Conoscente said. "Cyber could be worse than we imagine".

Reinsurance is critically important in cyber, with a little over half of all cyber premiums ceded to reinsurers - far more than in other lines. With the industry growing at breakneck pace and reinsurers reaching the limits of their appetite, new sources of capital will have to be found.

There was much discussion in Monte Carlo of Insurance-Linked Securities (ILS), a potential way of raising more capital for the industry, but divergent views on how feasible that will be for cyber.

Swiss Re's chief underwriting officer, Thierry Leger, was notably bearish on the likelihood of capital markets investors putting up additional funds for the industry.

"At this point I cannot see how capital markets would engage," said Leger.

In contrast, Hannover Re chairman Jean-Jacques Henchoz was much more upbeat on the idea.

"The long term potential for growth will necessarily need to involve different sources of capital to diversify the exposures," Henchoz said.

Panellists at the CyberInsurer.com roundtable discussion in Monte Carlo, which was organized in collaboration with Guy Carpenter, were agreed that the industry urgently needs new sources of capital to cope with booming demand, and that ILS could be part of the solution, though they acknowledged that investors have yet to be won over.

"There's obviously a nervousness around the unknown," said Daniel Carr, head of cyber at Ariel Re. "Cyber is complex, it's uncertain. There's still a lot of skepticism, but equally, there's more willingness to lean into that and see if we can try to find a way to participate in the risk."