Cyber Insurance
The year 2023 will see the growth of the cyber insurance industry as cyber attacks and related risk continues to increase. The geopolitical shifts, the economic slowdown, and premium price hikes will likely make the market oscillate a lot. At the same time, experts in the industry are hoping that competition will increase, underwriting capabilities will rise and businesses will feel more assured through mature cyber insurance programs.?
Find out in-depth about the history of cyber insurance, current challenges and how 2023 will possibly reshape it.?
?Cyber Insurance in the Past
Approximately 25 years ago, cyber insurance became a reality when the insurance giant AIG launched it in 1997. Thereafter, till the 2016-17 periods, cyber insurance remained an optional thing or add-on to other insurance types. Business organisations with IT security risks often opted for cyber insurance without having much knowledge about legal ramifications.?
However, in the last half a decade, cyber-attacks have increased exponentially. The scale of cyber attacks and data breaches rose with the emergence of advanced malware such as NotPetya. In addition, giant corporations such as Uber were targeted.?
By 2018, several other high-profile cyber attack incidents came to light leading to the growth of the cyber insurance industry. Cyber insurance was believed to be more profitable than other insurance types.?However, things took a drastic turn in 2020. The average loss ratio for insurance companies touched as high as 67%.?
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?How Cyber Insurance is Changing Today
The loss ratio continues to be above 60% even today. However, the insurance industry is combating losses by increasing premiums which have increased by 94% in the past few years. As a result, the global insurance market is predicted to grow in the next five to ten years, as per Lloyds of London (the largest insurance marketplace in the world). However, this will be due to premium price hikes rather than a broadening of the coverage.?
Cyber Insurance in 2023: Predictions
Cyber insurance continues to be an evolving market with different factors at play all the time. Thus, it is always a daunting task to predict cyber insurance trends. The experts, however, believe that these are the existing trends and most probably will accelerate as the year progresses. Find out what they are below.
1. Two underwriting trends have engulfed the cyber insurance market in the last many years. First is the compound rate and the second is the underwriting standards. Both of these aspects have gained significant focus recently due to the increase in loss ratios, which in turn, have increased because of growing ransomware attacks. Other expected trends are:
2. Systemic risk has been a bone of contention for the cyber insurance sector for a long time. Benchmarking is difficult in cyber insurance as there are no precedents or history. The ever-evolving threat landscape does not give an indication of how events could unfold in the future. Thus, regulators will pay attention to systemic cyber risks in 2023.?
3. Analytics tools will be widely adopted across all levels, especially for underwriting. The right data and its assessment will help find potential sources of risk. In addition, it will help cyber insurance experts to develop long-term strategies.