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An article from the cyber reinsurance market, that is not expected to grow significantly until underwriting tools are developed to better assess cyber risk. The demand for cyber insurance is increasing with gross written premiums expected to be $20Bn by 2025. However insurance premiums are increasing, cover reducing, policy exclusions, cancellations and insurance companies exiting the market.
Cyber risk is not like other insurance risks (you would expect me to say that) its not easily predictable, why? SMEs make up 95% of businesses, they do not manage the risk and rely on insurance to mitigate exposure; the attack surface of most companies is rarely known, documented or managed; hackers can be nation state, proxies or anything in between (the Lapsus$ group were 16 years of age working from their bedroom); cyber attacks can come from anywhere to anywhere in the world; cyber attacks impact delicate global supply chains (Toyota hack March 2022), steal IP and impact national security (Lloyds recent exclusions); cyber risk mitigation standards require the adoption of +110 cyber practices making modelling at an organisation level impossible; silent cyber exposure is a complicating factors affecting reinsurers aggregated losses.
The insurance industry cannot mitigate all risks, but it is in a position to support risk transfer when and if organisations put in place their own risk mitigations practices, practices that insurance industry can attest for coverage. We have said previously the insurance industry has to move ‘left of bang’ (https://lnkd.in/ecukvdWd), to enforce cyber security risk compliance, oversight and assurance and support proposed cyber regulations.
Reinsurance capacity needs to increase. But will increasing reinsurance capacity lead to a bigger pot of capital to drain unless the problem is better managed and ILS investors do not yet seem comfortable jumping into the market just yet.
Ted Dziekanowski
#cybersecurity #cyberinsurance #cyberriskmanagement #theaugustagroup
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