Howden Re Highlights Pressing Structural and Growth Challenges in Cyber-Reinsurance Market

Howden Re has released its latest report, titled Into the Cyberverse, offering a detailed analysis of the cyber-reinsurance market and identifying structural inefficiencies, emerging trends, and critical needs for innovation and investment. According to the report, the cyber-insurance market is estimated to generate $15.85 billion in global gross written premium (GWP) in 2025, with reinsurers capturing roughly 36 percent of this total.

Per Howden Re, the current cyber-reinsurance ecosystem is dominated by a small group of players: the top 5ve reinsurers hold 62 percent of cyber GWP, rising to 87 percent when the top 10 are included. While this reflects experience at the top, it also signals a lack of market diversification, which may hinder long-term scalability and resilience.

The report reveals that quota share cessions have declined from 57 percent 5 years ago to 45 percent today, indicating a shift in buyer behavior toward nonproportional structures to better manage tail risk and retain premium. According to the report, this shift has been driven by improved profitability in nonproportional reinsurance, which often provides better alignment with reinsurers' cost structures and exposure appetites.

Howden Re also presents a hypothetical future market scenario in which cyber-insurance GWP doubles to $30 billion. In this outlook, the share of business ceded via quota share drops further to 25 percent, while the nonproportional segment increases to 6.5 percent compared to 4 percent today. According to the report, such a market would necessitate robust retrocession capacity to support reinsurers' growing tail exposures, particularly in the event-driven space.

Per the report, one of the key challenges facing the sector is a lack of mature retrocession markets. While quota share remains the primary tool for managing reinsurer volatility, Howden Re argues that new instruments—such as "hard retro" and indexed event products—are needed to build sustainable retro capacity, especially for nonproportional portfolios.

Another constraint identified in the report is model reliability. According to Howden Re, major cyber-model vendors currently revise platforms every 12–18 months, with changes as high as ±20 percent, a stark contrast to the 5–10 percent adjustments typical of property catastrophe models. This instability complicates pricing and undermines confidence, especially in model-dependent products such as catastrophe bonds and industry loss warranties.

Howden Re states that cyber-event-based reinsurance products exhibit stronger correlations between expected loss and rate-on-line, suggesting greater pricing accuracy in these segments. However, for aggregate stop-loss structures, the correlation remains weak, reflecting a continued reliance on actuarial judgment and structural considerations.

According to the report, realizing the full potential of the cyber-reinsurance market will depend on increased vendor model stability, strategic diversification of reinsurance panels, and expanded access to retrocession solutions. Howden Re emphasizes that both cedents and reinsurers must critically assess reinsurance efficiency.