The cyber risk insurance market is experiencing rapid development, with the size of global gross written premiums growing from $850 million in 2012 to an estimated $2.5 billion in 2014, according to a new report from Timetric.
The cyber risk insurance market is gaining traction due to a growing number of cyber attacks and businesses’ increasing reliance on technology for operational capabilities and storing data.
But insurance firms are responding slowly to this rising demand, and there are still a number of imperfections in the market that is leading to a sub-optimal outcome, according to Timetric.
Jay Patel, insurance analyst at Timetric, commented: “Total global losses from cyber crime stood at $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.”
The demand for cyber insurance in Europe is expected to grow substantially, once the new general data protection law is finalised 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 of up €1 million or 2 percent of the company’s global annual turnover.
The cyber insurance market in Europe is also underpenetrated, with an estimated worth of $150 million in gross written premiums in 2014. In comparison, the US is leading with approximately 90 percent of the global premiums in the cyber insurance market, valued at $2 billion in gross written premiums in 2014.
“The reason why the European market is less developed than the US 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,” said Patel.
