Cyber insurance is poised for exponential growth over the coming decade, but it remains a capital-intensive peril that requires structural innovation, according to CyberCube, the cyber-risk analytics company.

In a new report based on CyberCube’s cyber-risk aggregation tool, Portfolio Manager, the mid-range projection suggests that the US stand-alone cyber insurance market could reach $45 billion in premium by 2034, a five-fold increase from today.

Key findings from the report, Projecting Cyber Insurance Growth: A 10-Year US Market Outlook, include rapid growth projections, cyber as a peak peril and capital requirements.

The report says cyber insurance is projected to grow rapidly, driven by increasing digitisation of the global economy and rising concerns about cyber-risk.

CyberCube has modelled three compound annual growth rate factors for the US insurance industry to 2034: 10 per cent growth resulting in $17 billion of premium; 20 per cent growth leading to $45 billion of premium; and 30 per cent growth creating $109 billion of US cyber premium.

CyberCube’s US industry exposure database pegs US stand-alone premium in 2023 at $8 billion.

The organisation said cyber will become a peak peril, with the potential for losses from US stand-alone cyber to exceed Hurricane Katrina, the largest insurable natural catastrophe to date, costing the [insurance and reinsurance] industry $102 billion in 2005.

At 20 per cent compound annual growth rate, the amount of capital required to manage a 1-in-250-year loss would be $121 billion, CyberCube said.

The report says the cyber [insurance and reinsurance] market will need to substantially increase capital to enable this growth potential, with increases needed from multiple sources including insurers, reinsurers, capital markets and potentially private-public partnerships.

Alex Tenenbaum, director of services and lead author of the report, said: “The cyber insurance market is set for outsized growth compared with other lines of P&C insurance over the coming ten years.

“Structural changes are required to support sustainable growth. Some of these changes are starting to emerge and will require fuel to accelerate their growth — for example, penetration into the small business space and the emergence of the cyber insurance-linked securities market.

“Some are still very much in their infancy and will require broader market collaboration to unlock, such as public-private partnerships that work for both sides.”

Rebecca Bole, head of Industry Engagement, added: “The property & casualty insurance sector stands at the threshold of a once-in-a-generation opportunity to build a sustainable market for cyber-risk transfer. This enables societal resilience to one of the peak risks facing economies today.”

CyberCube is a provider of software-as-a-service cyber-risk analytics to quantify cyber-risk in financial terms. The platform was established in 2015 within Symantec and now operates as a stand alone company.

The company’s investors include HSCM Bermuda, Forgepoint Capital and Morgan Stanley Tactical Value.