Cyber market growth drivers have not kicked in as expected and the space remains soft for a fourth year, according to a Howden Re report.

Tower expansion, international market diversification and SME penetration have not “scaled sufficiently to offset the increase in available capacity”.

In predicting when the market may turn, the broker says losses are becoming more frequent and are increasingly weighted towards third-party exposures, with AI developments accelerating these trends.

This means deterioration may take longer to appear, reinforcing the importance of forward-looking indicators, according to Howden Re, which examined property-catastrophe, directors and officers, and capital market cycles for the paper titled Cygenesis: A New Framework for Reading the Cyber Market Cycle.

Although the market is maturing rapidly, it remains a relatively new class, so cedants need to consider a range of outcomes, from shock events to gradual loss accumulation and delayed claims, according to Howden Re global head of cyber Luke Foord-Kelcey.

“The signals of the next turn will be more challenging to read,” he said.

Emerging indicators suggest AI could help more criminals discover and exploit vulnerabilities.

Reinsurance programs designed with breach frequency and accumulation in mind, not only severity, may become increasingly relevant.

Multiyear sources of capacity such as cyber catastrophe bonds – which lock in cover across contract cycles in a way traditional reinsurance cannot – offer some protection against capital flight that could follow significant market losses.

See the report here.