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I’m coming to the opinion that the cyber insurance market is currently a bit of a paradox.
The cyber insurance market is on the rise. But the regulator is asking for clarity on the market exposure to cyber. The global impact, sophistication and complexity of cyber attacks is increasing, perpetuating amongst other things the cyber insurance market. The difference between the amount of liquidity in the re-insurance market for all losses is not large enough to cover the estimated total impact of cyber-crime alone.
Capital Markets have been slow at supporting the re-insurance market with additional liquidity (ILS). Cyber is a risk which is unpredictable, without any meaningful data to be able to model it and the regulatory agenda is changing. Making investment returns far from certain.
So is Munich Re right, absorb losses without the need for liquidity from capital markets, yet? With increased regulatory oversight will the market cool for underwriting cyber insurance? I think the strategies in the insurance market will and are changing.
There is a complimentary approach, companies can put in place cyber security strategies and plans to manage the risk alongside insurance. To make cyber risk management a value add, rather than a perceived sunk cost.
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