Thursday, December 7, 2017

Cyber risk coverage generates around USD 3-4 billion in annual premiums globally, and is expected to grow to USD 20 billion within a decade - making it one of the fastest growing segments of the global insurance industry.

Demand growth from retail and corporate customers is driven by increased public awareness of cyber risk, in line with a pick-up in the impact and sophistication of cyber errors and attacks, and the implementation of new data protection regulations that encourage financial protection against cyber-related losses.

The rapidly evolving nature of cyber risk can present challenges to price and manage these risks. Key issues include a lack of historical data and effective modeling practices, legal uncertainty, and potential for accumulation risk due to the interconnected nature of some attacks.

These issues are inherent to a developing and quickly growing market, which insurers are working to address. Insurers are developing new analytical approaches, improving data collection and addressing legal uncertainties. The public sector could play a major enabling role in developing and facilitating the market by formulating appropriate guidance, developing data standards and disclosure by cyber-affected entities, and encouraging the creation of databases that collect data on cyber incidents which are accessible to insurance groups. 

IIF Authors

Martin Boer

Martin Boer Director Regulatory Affairs IIF
Director, Regulatory Affairs