As cyberthreats grow more sophisticated, captive insurance programmes are stepping up to fill a widening protection gap. Experts say the market for cyber-coverage remains limited and expensive, but captives are proving to be one of the most adaptable tools to manage the rising risk.

“Cyber-risk itself, and then privacy concerns ... [are] the most creative, historically speaking in insurance technology,“ said Muhammad Khan, partner at Deloitte, speaking at the Bermuda Captive Conference on Wednesday at the Hamilton Princess Hotel & Beach Club.

He added that “access of cyber-coverage in our industry [is] limited... the pricing of those coverages was [challenging]” during the industry’s shift toward tech-driven risk solutions.

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Bermuda is already playing an outsized role. In 2022, Bermuda-based insurers and groups wrote or consolidated $7.5 billion in global cyber gross written premiums.

That is more than half the worldwide total, and the local captive market is expanding. Cyber-related premiums rose 14 per cent that year to $172 million, with 33 Bermuda captives offering some form of cyber-coverage.

Why captives? Their flexibility. These specialised insurance structures can isolate digital risk, tailor coverage and offer fast access to claims and capital — advantages traditional carriers often struggle to match.

“I look at captives and cyber, because for me, cyber can be a super systemic risk on a national or global level,” said Emilio Figueroa, head of insurance at Eventual Weather. “So placing cyber-coverage, or creating your own cyberprogrammes and placing them within the captive space ... minimising exposure or additional exposure that you may have across all nations, [is] super important to do and adaptive [to be] trying to deal with.”

But protecting against cyberthreats takes more than just a policy. “These technologies require that everyone within the organisation ... needs to have good understanding of the quality,” Mr Khan said, pointing to the need for a company-wide approach to cyber-resilience.

With the global cyberinsurance market expected to grow from $10.3 billion to $17.6 billion by 2028, and the overall captive market forecast to hit $250 billion, experts said captives may be the future of cyberprotection.