Increased digitalisation of critical infrastructure has made it more vulnerable to cyber threats, according to Swiss Re.
In a new study released this week, Cyber insurance: strengthening resilience for the digital transformation, the reinsurer says that this increased vulnerability brings with it the potential for systemic fallout should a cyberattack interrupt the provision of clean water, energy or internet services for an extended period of time.
Indeed, this new risk era requires a different approach to cyber insurance, the study suggests, with the cyber risk landscape is rapidly evolving, with cyberattacks increasing in severity and sophistication. Hackers now use triple extortion techniques and ransomware-as-a-service has lowered entry barriers for cybercriminals. In addition,
Jérôme Haegeli, (pic) Swiss Re group chief economist said: “As cyberattacks have increased, so has awareness of the risk – and with it, demand for cyber insurance is growing. However, due to the high degree of uncertainty regarding expected losses and the evolving nature of the risk, its insurability is limited. This in turn restrains market capacity, leading to a protection gap of around 90%.”
The study suggests three areas of improvement where the (re)insurance industry can help to manage cyber risk more efficiently and increase insurability: increasing contract consistency and clarity, using standardised data and better modelling, and identifying new sources of capital.
Swiss Re said it is critical to improve the understanding of the risk, as this will help mitigate overall exposures and make society more resilient to cyberattacks with devastating and potentially systemic consequences. The human and networked nature of cyber means the risk will continually evolve and require a coordinated response. Enhancing cyber resilience will require collaboration between corporations, insurers and governments.
John Coletti, head of Cyber Reinsurance at Swiss added: “The cyber insurance market has tremendous growth potential. However, the market needs to mature further to ensure enough insurance protection is available. Our industry has a key role to play by addressing three issues: improving data and modelling, increasing contract consistency and clarity and identifying new sources of capital.”
Swiss Re added that the rising frequency and severity of cyberattacks has been a main driver of cyber insurance market growth. Global cyber insurance premiums reached an estimated $10 billion in 2021 and Swiss Re Institute forecasts 20% annual growth to 2025, with total premiums rising to $23 billion.
It said that the market has significant growth potential beyond these projections. Given estimates of annual global cyber losses at around $945 billion, roughly 90% of the risk remains uninsured.