Greater appetite around reinsurers ‘rolling the dice’ on ‘immature’ cyber market

Amid broadly softening primary insurance and reinsurance market conditions, where supply and capacity are increasingly outstripping demand, a greater number of reinsurers are looking to diversify their portfolios in 2025 by tapping into emerging risks – with the cyber market ringfenced as a key growth area.

Pinpointing the scale of this opportunity, the Reinsurance market dynamics: Midyear 2025 renewal report, published by broker Aon in July 2025, commented that “reinsurance capacity is poised to support growth in the global cyber insurance market” – with the associated cyber reinsurance market “forecast to grow from $6bn (£4.35bn) gross written premium (GWP) to $9bn (£6.52bn) by 2029”.

The report added that firms which employed “speed and agility” to “expand in new risk categories” – such as the cyber market – had the potential to secure “first mover advantages with lasting financial benefits”.

It continued: “Addressing the cyber protection gap remains the biggest challenge for the cyber insurance market. Despite increasing digitalisation and growing awareness of cyber risk among businesses, the value of cyber insurance is still underappreciated.

“Organisations report insurance is in place to cover only 19% of information assets compared to 60% for property, plant and equipment. Further, the likelihood of an intangible asset cyber event occurring is estimated by risk managers to be six times more likely than an event impacting property.

“Reinsurance capacity is poised to support growth in the global cyber insurance market, which is expected to reach $24bn (£17.4bn) by 2029, up from around $15bn (£10.9bn) today.”

Appetite around this line of business was certainly seen during the 1/7 renewal period, with Aon’s report noting that “cyber insurers experienced a buyers’ market for reinsurance at midyear renewals, with ample capacity and further product innovation”.

Furthermore, Gallager Re’s 1^st view: Challenging the status quo report – published in July 2025 – agreed that “there was growing demand, and supply, of turnkey solutions for international cyber, especially in the Asia-Pacific region”.

It added that during the 1/7 renewal window, there were “risk adjusted rate improvements in favour of reinsurance and retro purchasers” of cyber cover, which Gallagher Re believes is the “expected consequences of a market experiencing excess supply of reinsurance capacity, coupled with a slowdown in organic growth”.

Nick Pomeroy, head of reinsurance and broking at Lloyd’s broker QRG Specialty, told Insurance Times that the reinsurance market’s diversification focus on emerging markets could be described as “the flavour of the moment”, presenting the market’s greatest opportunity – and challenge.

He explained: “The whole mantra behind the [reinsurance market], in a global sense, [is that firms are] all looking to diversify. Let’s go and write something new, like cyber business, which nobody knows anything about.

“[In comparison,] you’ve got a property market that’s been going effectively since the 17th century. You pretty much know how many buildings burned down. You [have] the ability to model. You’ve got a pretty good idea where your book is going to go and what you’re looking at. And you buy your reinsurance accordingly.

“Cyber business is growing exponentially because as the perpetrators of cyber crimes get more sophisticated, what you tend to find is the insurance and reinsurance markets are closing the door after the horse has bolted. ‘Oh, there’s been another big loss. We’ll exclude that’ or approach it [in] a different way. Everywhere you turn there’s another loss you haven’t seen before.

“It is not necessarily an accident waiting to happen, but [firms are] rolling the dice [on] a very immature market. The insurers are quite a long way behind the perpetrators. Things are inherently much more volatile, yet it ticks all the boxes commercially, so all our eggs aren’t in one basket.”

Another developing market that is enticing reinsurer appetite, yet needs greater consideration, is renewable energy, continued Pomeroy.

He noted that although moving into this line of business is conceptually a good idea, it is vital that products are well defined because renewable energy storage is not as developed a proposition as the creation of renewable energy.

He explained: “If anything goes wrong between a wind turbine and the storage battery, you’ve got a massive business interruption loss. You’ve then got to discuss what you do with all the defunct wind turbines that are all made of amusing composite material.

“There are all these things that are being spawned off on what are embryonic markets. You build something new that’s going to help people [and] there’s going to be a potential downside to it.”

Supply versus demand

Undoubtedly, the biggest overarching trend impacting the reinsurance market this year is cyclical softening conditions – which are underpinning reinsurers’ drive for diversification and the uptick in new entrants across a multitude of business lines, as firms seek to branch out.

Tom Wakefield, global chief executive at Gallagher Re, said: “Buyers generally experienced a more competitive reinsurance market at the 1 July renewal compared to recent years, with capacity available even where demand increased and reinsurers looking to grow.

“With these conditions in place, clients had the opportunity to challenge the status quo and secure improvements to the structure and terms of their property and specialty reinsurance programmes.

“2025’s renewals are showing a consistent trend – a growing market in which the balance of supply and demand has tilted back towards reinsurance buyers.”

Wakefield observed that rate reductions were currently being seen across property treaties, while pricing remained “broadly flat” in casualty lines.

This view is broadly supported by other market commentators, with credit agency Fitch Ratings and Pomeroy both confirming that property rates have fallen by around 10% to 15% at the 1/7 renewals.

A briefing note published by Fitch Ratings on 15 July 2025 stated: “The global reinsurance market has ample capacity as rising supply outpaces incremental demand from cedants.

“This is shifting pricing power to be in favour of reinsurance buyers, particularly in property lines, while the balance remains more even in casualty. Competition is generally focused on price rather than terms and conditions (T&Cs).”

Pomeroy added: “Primarily, you’ve got supply outstripping demand, which means you’re going to compromise your underwriting ideals [and] ethics or your business doesn’t work because, like it or not, every year is a new year.

“If your income goes from X million to naught because you’re not prepared to follow the rates down, well that’s the end of that because the overheads and the staff costs and everything else still carry on.”

What about the small print?

A knock-on effect arising from these softer market circumstances is that “T&Cs are beginning to loosen”, according to Fitch Ratings.

It explained: “T&Cs are beginning to loosen as reinsurers become more willing to provide protection lower down on programmes, including at lower attachment points and for more frequent return periods.

“Working layer and aggregate reinsurance protection are making a comeback and reinsurers are becoming more open to negotiating T&Cs. The first signs of less stringent T&Cs are emerging, driven by heightened competition and a very gradual relaxation of underwriting discipline.”

Aon’s aforementioned report confirmed this market movement: “The property catastrophe market continued to benefit from increased supply across the board [during the 1/7 renewal window], leading to more flexible terms and conditions and greater pricing competition in all regions.

“The midyear renewal was notable for a further shift in the market’s appetite, with reinsurers more willing to provide protection lower down on programmes. Products that were not widely available at previous recent renewals were up for discussion, including aggregate covers.”

Nat cat will determine 1/1

Looking ahead to 2026 and the upcoming 1/1 reinsurance renewals, Huw Evans, partner and head of insurance at professional services firm KPMG UK, noted that the next few months up until October will be the decider in terms of whether the market has a “very, very difficult year” or “a manageable year” – influenced, of course, by the “critical” hurricane season in the US.

Evans emphasised that hurricane activity in this jurisdiction will carry more weight than usual this year following “a pretty heavy first half of the year for reinsurers to bear in terms of natural catastrophe” losses.

This is because of the impact of wildfires hitting Los Angeles back in January 2025, as well as a series of severe convective storms (SCS) – such as tornadoes – that have been more rife than is the norm up until mid-May.

Gallagher Re’s H1 natural catastrophe and climate report, published in July 2025, confirmed that total insured global losses across this class of business reached $84bn (£60.9bn) in the first six months of the year – a record H1 high since 2011. It added that 92% of this activity stemmed from the US, thanks to SCS and wildfire activity.

Weather related events, meanwhile, added $56bn (£40.6bn) to Gallagher Re’s global insured losses total for H1 2025 – an increase of 176% on the report’s 10-year average figure.

Overall, however, Evans is optimistic about the reinsurance market’s stability – with Fitch Ratings classing the sector’s outlook as “neutral” in July 2025 and both Evans and Pomeroy agreeing that the 1/7 renewal window did not reveal any great or drastic change in clients’ reinsurance programmes, strategies or provisions.

Evans continued: “The reinsurance market has operated in a pretty orderly way for the last two years or so. Obviously, it had a very bumpy period in 2022 [and] 2023, but it’s been much more orderly since then in terms of price adjustments and capacity.”