Munich Re warns European cyber reinsurance rates must rise

Munich Re has warned that German and European cyber reinsurance rates will need to rise, citing loss trends and concerns about accumulation potential.

Munich Re’s market share in European cyber reinsurance ranges from around 5% in some countries to over 20% in Germany.

The company said its combined ratio in cyber reinsurance worldwide is around 85%, and “a notch higher” in Europe, driven by a few large single losses.

According to Munich Re, on a market-wide basis Germany has been unprofitable for cyber reinsurers, with combined ratios “way over” 100%. 

“In our portfolio, we see an increase in losses, but not to the same extent,” Claudia Hasse, chief executive at Munich Re for Germany, Cyber Europe & Latin America, said. 

Earlier this month Moody’s noted that the number of cyberattacks is rising in Europe. About 38% of those attacks are related to the conflict between Russia and Ukraine. 

However, attacks not related to the conflict are also on the up, with twice as many of those being recorded in the first nine months of 2022 than in all of 2021. (see image below)

Munich Re writes all segments, including industrial, Small and medium-sized enterprises (SME) as well as private lines with a certain preference for SME and private lines.

Hasse echoed many of her peers in the cyber reinsurance industry when she emphasized the need to exclude systemic risks like war risks from policies.

In August, Lloyd's sought to set expectations with a bulletin that requires cyber insurance policies to exclude losses arising not just from war as it's traditionally understood but also from any state-backed cyber attacks that "significantly impair the ability of a state to function".

Such clauses are being adapted to individual European markets. 

“This is important in order to create confidence regarding cyber so that new capital, especially from the capital markets, comes ready to come in,” Hasse said.