As the world races to secure a core vulnerability in the coding behind the internet insurance leaders have said the fear of cyber-attack is the risk that is creating the greatest concern.

KPMG has released the results of its UK Sentiment Survey of over 100 insurance leaders, which found that 30% identify AI-enabled cyber-attacks as the emerging risk the industry is least prepared for, ahead of climate-related catastrophes or technology system failures and outages.

So-called AI fronter models are increasingly exposing vulnerabilities in IT systems and challenging the operational resilience of major financial institutions and their extended ecosystem of suppliers, partners and customers.

The research also highlighted the operational resilience capabilities insurance leaders believe should receive greatest attention in the coming year. Six in ten (60%) say cyber resilience should be strengthened over the next 12 months, while 45% point to AI governance and oversight.

At the same time, AI is seen as an important part of the solution with 30% of leaders identifying it as the emerging technology offering the greatest opportunity to strengthen UK resilience.

Huw Evans, Head of Insurance and Partner, Financial Services at KPMG UK, said: “The rapid development of AI frontier models is challenging insurers’ operational resilience against a range of rapidly evolving Cyber attacks.

“As concerns around the risks of AI frontier models intensify, insurers are increasingly acting at speed to enhance protection, strengthen cyber protection and use advanced AI to protect themselves against AI-enabled threats. This enhanced protection brings added benefits, enabling more confident investment in wider business transformation and reassuring customers and suppliers.

Concerns around cyber resilience also extend beyond individual insurers and their commercial interests. The survey also revealed the importance insurance leaders place on cyber resilience as a national priority, with more than a quarter (28%) of insurance leaders say cyber security should be the UK’s top priority for strengthening national resilience over the next year, placing it well ahead of defence resilience (17%).

To strengthen resilience, almost four in ten (39%) say improving cyber resilience is the area requiring the greatest collaboration between insurers, government and tech companies, compared with 18% who point to protecting national infrastructure.

However, when asked about the biggest barrier preventing insurers from providing greater protection against systemic cyber risks to clients, almost a third (32%) point to limited industry co-operation because of competitive sensitivities. This was more than twice the number who said the biggest barrier was accumulation of systemic risk or regulation (15%).

Evans concluded: “Financial services is interwoven into our lives and the global economy; this interconnectivity means resilience cannot be built firm by firm. Cyber risk also increasingly sits within a much wider geopolitical picture. As an industry, we need to improve our ability to translate geopolitical risk into better underwriting, risk management and overall resilience.

“Greater co-operation will grow as the risks materialise. Insurers, government and technology providers need to increase further the sharing of information and understanding where vulnerabilities and dependencies sit to minimise the risk of systemically damaging attacks.