Cyber insurance is generally considered a “top end of town” purchase but it is now attracting small and medium-sized enterprises in the US, according to Swiss Re Chief Economist Kurt Karl.

Businesses are taking out cover against losing control of credit card information and having to compensate affected consumers.

“It is extremely difficult these days to protect against the enormous number of hackers,” Dr Karl told insuranceNEWS.com.au while visiting Sydney last week.

He says the major threats from cyber fraud are loss of reputation and compensation, and SME owners are mitigating some of the risk with partial cover.

Dr Karl forecasts solid premium growth in the emerging economies of Africa and Asia and in developed nations too, as their economies continue to recover.

Demand will come from a growing middle class and major infrastructure projects in emerging markets. “There is a great need for specialty lines.”

Prices in marine and aviation have been falling after a relatively benign few years, but that is about to change following attacks on aircraft in Ukraine and Libya.

There is also strong demand for engineering insurance, particularly for oil and gas projects.

Dr Karl says the reinsurance market remains profitable for traditional reinsurers and new entrants such as hedge and super funds, despite capital inflows.

“Volatility and pricing will go down and profitability will go down but it is still a profitable business.”

However, he says hedge funds have a high failure rate, about 10% a year, so insurers have a greater counterparty risk than with traditional reinsurance. He questions whether the new entrants will remain if they have to pay out on a catastrophe.