Cyber and Property Combined Coverage Strategies

This technical report examines the integration of cyber risk into property catastrophe reinsurance frameworks. It outlines how cyber risk has emerged as a significant driver of volatility and capital strain for the (re)insurance industry, comparable to traditional property catastrophe risks. The report details the growth of the cyber insurance market, highlighting the challenges insurers face in protecting against extreme cyber tail events. It presents a methodology for combining cyber tail risk with uncorrelated property catastrophe risk to achieve lower pricing and capital requirements. The report also discusses the anticipated growth in demand for cyber excess of loss tail protection and the expected changes in reinsurance structures as insurers adapt to the evolving risk landscape. Additionally, it addresses the limitations of traditional reinsurance markets in supporting cyber tail risk and suggests the need for innovative approaches, including the involvement of insurance-linked securities and catastrophe bond markets to diversify the capital base.