Source: The Global State of Information Security Survey 2015, PwC – cited in Timetric’s Insurance Intelligence Center Insight report The Future of Cyber Risk Insurance
- The Cyber risk insurance market has immense growth potential as businesses become more aware of the importance of protecting themselves from the costs of cyberattacks.
- The market penetration of Cyber risk insurance is very low globally. Around 50 insurers based in the US and Lloyd’s of London offer cyber insurance products.
- The majority of the cyber risk insurance market is concentrated in the developed economies, particularly in the US and Europe. The size and penetration of cyber risk insurance market is very low in other parts of the world.
- According to a 2014 survey by PartnerRe and Advisen, the top three drivers for the increasing demand of Cyber risk insurance are: news and publicity related to cyber losses; increased awareness about cyber risks; and business requirement to buy cyber cover by a third-party.
- The US is ahead of other counties in terms of market size for cyber risk insurance, product development as well as legislation related to data security and privacy laws. The US accounts for approximately 90% of global premium in the cyber insurance market – valued at US$2bn in gross written premiums in 2014 and estimated to reach US$2.75 billion in 2015 – according to Betterley Risk Consultants.
- Premiums charged for cyber risk insurance are relatively high, being three-times higher than CGL policies and six-times higher than property insurance, according to a study published by Marsh and the UK Government in 2015. The high premiums charged for cyber insurance are a sign of lower price differentiation.
- This indicates that premiums are being priced conservatively, as the cyber insurance market is still in its early stages of development.
- A lack of actuarial data, as well as the absence of data on cyber losses that result in claims, creates difficulties for insurers attempting to set the appropriate premium for the associated cyber-risk.
- Moreover, uncertainty and the dynamic nature of cyber risks have resulted in high premiums, high deductibles and low insurance cover.
- Cyber insurance products lack standardization and are tailored according to the requirement of the client. Insurers use a lot of factors to determine the size of the premium, such as the industry in which the business functions, the type of data stored, the extent of cyber exposure, company revenues and the customer base
Source: Insight Report: The Future of Cyber Risk Insurance, which is available at Timetric’s Insurance Intelligence Center