BY Fraser Tennant
A prediction that the global cyber insurance market could expand to $7.5bn in annual premiums by 2020 is among the headline findings of new research published by PwC this week.
The research report – ‘Insurance 2020 & beyond: Reaping the dividends of cyber resilience' – also suggests that as boards become increasingly aware of the need to protect against potentially devastating cyber attacks, insurers will find more clients questioning the value of their current policies.
The PwC analysis follows hot on the heels of the firm’s 18th Annual Global CEO Survey, which revealed that 61 percent of business leaders across all industries see cyber attacks as a threat to the growth of their business.
"If insurers continue to simply rely on tight blanket policy restrictions and conservative pricing strategies to cushion the uncertainty, they are at serious risk of missing this rare market opportunity to secure high margins in a soft market," said Paul Delbridge, an insurance partner at PwC.
Furthermore, Mr Delbridge believes that should the cyber insurance industry take too long to innovate, there is a very real risk that a disruptor will attempt to move in and corner the market with aggressive pricing and more favourable terms.
Additionally, the PwC report finds that insurers (as well as reinsurers and brokers) can maximise opportunities whilst managing exposures by: (i) maintaining their own cyber risk management credibility through effective in-house safeguards against cyber attacks; (ii) robustly modelling exposures and potential losses to provide a better understanding of the evolving threat; (iii) identifying concentrations of exposure and systemic risks in an increasingly interconnected economy; and (iv) assessing and monitoring trends in frequencies and severities of attritional and large losses, and in the types of attack being perpetrated.
“For insurers, cyber risk is in many ways a risk like no other," opines Mr Delbridge. “It is equally an opportunity. Insurers who wish to succeed will base their future coverage offerings on conditional regular risk assessments of client operations and the actions required in response to these reviews. A more informed approach will enable insurers to reduce uncertain exposures whilst offering clients the types of coverage and attractive premium rates they are beginning to ask for.”