Swiss Re says cyber to be 'as big as property' by 2040

Swiss Re has predicted that the cyber market will become as big as the property market by 2040.

At present the total size of the cyber market is estimated at around $10bn, a tiny fraction of the property market. 

But Swiss Re said it intends to remain ‘underweight’ in cyber until it can better understand the peril, particularly in terms of the systemic risk. 

Swiss Re writes about €600m of cyber premium, about 80% of which comes from reinsurance, and the remainder from primary.

By contrast, Munich Re writes about $1.47bn of cyber premiums in 2021, of which about 55% comes from reinsurance. 

Swiss Re chief underwriting officer Thierry Leger also said suggested that prices would need to continue to improve before the company committed more significant capacity to the peril. 

He said that, market-wide, a combined ratio of 85% in a typical year without a cyber catastrophe would be a reasonable objective.

A key question facing carriers will be over where the capacity to support the cyber market will come from. Some have suggested that the capital markets could play a part. 

Paul Schultz, chief executive of Aon Securities, said earlier the same day that he believes 2023 will be the year when the market sees the first cyber cat bond. 

However, Leger was much more bearish on the likelihood of capital market investors participating.

Investors, he noted, “rely very heavily on models. They rely very heavily on objective triggers. At this point I cannot see how capital markets would engage.”

Any objective trigger in cyber, he said, would raise significant problems for cedants in terms of basis risk.