Cyber Insurance is a security strategy that aims at mitigating cyber risks by providing coverage for recovery costs and expenses in the event of a cyber attack or data breach.
Global Internet access has increased substantially in recent years. According to data published in the 2018 Global Digital suite of reports, the number of Internet users across the globe has exceeded 4 billion. The data also shows that this number is expected to rise by 7% each coming year.
With significant Internet growth and expansion over the recent years, there have been growing concerns amongst the online community pertaining to web security and data privacy. Hackers and Phishers are constantly on the hunt, targeting online accounts and databases attempting to retrieve sensitive information for monetary gains.
The past few months have seen numerous online data breaches and cyber-attacks affecting companies like Under Armour, Whole Foods, Best Buy and even entire cities (i.e., the recent City of Atlanta ransomware attack). In only the past 12 months, there has been a 36% increase in online ransomware attacks. The Federal Bureau of Investigations (FBI) reported that there were more than 4,000 ransomware attacks occurring every single day.
In the wake of growing cyber crime and threats poised to online IT systems and businesses, cyber security companies are developing new products and policies to counter the menace of cyber-attacks. Companies like Allianz Global Corporate are underwriting new policies offering comprehensive insurance plans to businesses, providing them protection against impending online threats and providing insights about cyber risk management.
Various companies and businesses in the IT sector have already begun seeking cyber insurance, which aims to mitigate cyber risks by providing coverage for recovery costs in the event of a data breach or a system hack. Recently, a massive data breach impacted one of the leading consumer credit reporting companies, Equifax, in which the data of more than 145 million Americans was compromised, and damages compounding to millions of dollars were estimated. After details of the hack were made public, analysis from a private analytics and risk management company, Property Claim Services (PCS), showed that because the company had cybersecurity coverage, they would recover $125 million to compensate for the losses.
Cyber insurance is a rapidly emerging market. According to the Organization for Economic Co-operation and Development, cyber insurance generated around $3.5 billion in revenue in 2016 and the industry is expected to grow in the coming years as statistics show that revenues in this industry have increased steadily by a rate of 30% each year for the past 5 years. Similar market forecasts presented by Allied Market Research suggests that the market will be worth more than $14 billion by 2022.
Talking about the challenges the cyber insurance industry was facing, Nick Economidis, a cyber liability underwriter at a private insurance firm, Beazley PLC, stated that the biggest issue plaguing cyber insurance underwriters was the lack of meaningful data. “The worst data is probably in cyber insurance” he was quoted as saying.
Lori Bailey, the global head for a private risk management firm, Zurich Insurance Group, also resounded similar notes when he said that the biggest obstacle in the way of cyber insurance policy makers was the incongruity and uncertainty in the data required to create cyber insurance models.