There’s a note of warning for both consumers and companies as the insurance industry looks for more capital to underwrite complex risks including…

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There’s a note of warning for both consumers and companies as the insurance industry looks for more capital to underwrite complex risks including natural disasters and cyber attacks. With the Chief Executive of Aon stating that Insurance needs $1trn from private equity to close the protection gap.

For insurance categories such as cyber and natural disasters the protection gap is increasing. The gap between the full cost of remediating an insured event such as that caused by natural disasters or cyber, and the insurance coverage is widening. Less that 30% of the costs of natural disaster has been covered since 2000. At a time when both the frequency and impact of natural disasters and cyber incidents is increasing, and the insurance industry is looking for $1trn from private equity to fill coverage gaps.

“If we don’t bring in a trillion dollars in alternative capital in the next decade, we’ve failed,” Aon chief executive Greg Case told the Financial Times.

But there’s a challenge with cyber risk, as we’ve seen with cyber attacks such as Marks and Spencer. That is touted to have cyberinsurance coverage of £100million. It doesn’t take to many incidents to wipe out the profits of cyber insurers. The market coverage of cyber insurance is low, with around 45% of UK businesses having cyber insurance.

https://lnkd.in/eBvVk_gW

One is not sure that cybersecurity is a risk that private equity wants to get involved in, it’s complex, unpredictable, costly to remediate and is an indiscriminate risk affecting all companies. If cyber insurance coverage increases, will insurers have enough capital to cover the risk, will private equity provide liquidity. If the current size of ILSs is anything to go by, then they may not?

As a man made threat companies can take proactive steps to manager cyber attacks, not so natural disasters.

@Thaddeus Dziekanowski Brian D. McCarthy Faisal Khan

Veritas GRC

#cybersecurity #cyberriskmanagement #cyberinsurance

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