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The SME market is a significant one for the cyber insurance industry. It is also a market with the highest risk, which is due to the 99% problem. A problem that we have discussed many times, and one that cyber insurers cannot overcome unless they shift their risk transfer focus.
This report by Swiss Re asks 2 simple questions.
1. What is holding cyber insurance back from keeping pace with cyber risk?
2. What will be needed to help it shift into the next gear for stronger growth?
Questions that we addressed years ago, you have to address the 99% problem. The 99% problem is very simple, not so much a problem, but a requirement. 99% of companies are SMEs that, in general, have ignored cybersecurity; they cannot afford to manage cybersecurity risk, nor cannot access the limited cybersecurity resources required to manage cybersecurity. SMEs by volume are a significant market, but they have historically seen no need for cyber insurance. More recently, SMEs have had to face increased cybersecurity regulations.
Cybersecurity regulation changes the risk transfer equation for SMEs. If Cyber insurers understood that cyber insurance cannot be sold as they would sell home or car insurance, they would understand that historically, there have been no drivers for SMEs to buy cyber insurance. That changes with the introduction of cyber regulation, as cyber regulation changes the risk transfer equation. It pushes cyber risk management Left of Bang into the boardroom. Transferring risk management to the benefit of cyber insurers, if they can get a grip on the cybersecurity and risk transfer value chain.
The exposure curve in the Swiss Re report clearly demonstrates that cyber risk is rising, and premium reductions are not affecting premium growth. Cyber insurers need to get a grip on the cyber risk value chain if they are to grow the SME market. They need to review EU NIS 2, EU DORA, Abu Dhabi ADGM cyber regulations, and the SEC Final Cyber Rule to support SMEs in managing cyber risk transfer.
As of today, cyber Insurers sit Right of Bang.
@Thaddeus Dziekanowski Brian D. McCarthy Faisal Khan Judy Selby
Veritas GRC
#cybersecurity #cyberinsurance
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