Insurers Respond Slowly to Growing Demand for Cyber Insurance

[Audrey McNeil <audrey () riskbasedsecurity com>]

http://www.insurancejournal.com/news/international/2015/10/05/383826.htm

The cyber risk insurance market is experiencing rapid development, with the
size of global gross written premiums growing from US$850 million in 2012
to an estimated US$2.5 billion in 2014, according to a new report by
London-based business intelligence company, Timetric.

While the cyber risk insurance market is gaining traction due to a growing
number of cyber attacks and the increasing reliance of businesses upon
technology for operational capabilities and storing data, insurance firms
are responding slowly to this rising demand, said the Timetric insight
report, titled “The Future of Cyber Risk Insurance.”

“Total global losses from cyber crime stood at US$445 billion as of June
2014. With governments becoming increasingly involved in cyber threats, the
prospect of compulsory cyber risk insurance could become a reality. It
would have a transformative impact upon the market and could create a
strong source of future revenues for non-life insurers,” commented Jay
Patel, insurance analyst at Timetric.

European Demand to Grow Substantially

The demand for cyber insurance in Europe is expected to grow substantially,
once the new General Data Protection (GDPR) law is finalized by the end of
2015. It is expected to come into force by 2017 in all the EU member
states, making data breach notification compulsory. This will likely give
more power to the regulators, along with an increase in penalties – up to
EUR1 million (US$1.3 million), or 2 percent of company’s global annual
turnover.

However, insurers have already experienced rapid growth in the demand for
cyber-risk insurance over the last few years, the report said, noting that
interest in cyber insurance has particularly grown among businesses that
hold sensitive consumer information such as telecommunication companies,
financial organizations and retailers.

The cyber insurance market in Europe is underpenetrated, with an estimated
worth of US$150 million in gross written premiums in 2014, the report said.

In comparison, it added, the U.S. leads with approximately 90 percent of
the global premiums in the cyber insurance market, which were valued at
US$2 billion in gross written premiums in 2014.

“The reason why the European market is less developed than the U.S. is
because of a small number cyber insurance products that are offered by
insurers and less business awareness of the cyber risk problem. However,
insurers are making forays to serve the European markets,” says Patel.

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