Some 41 percent of captives owned by Aon clients are incubating cyber risk, according to a report from the professional services firm.
The Aon Cyber Captive Survey 2019 is aimed at identifying cyber risks, advising implementation of risk and insurance management and ultimately assess the value of captives in dealing with these cyber issues.
Cyber risk financing strategies have evolved in response to developments in digital technologies, such as artificial intelligence, distributed ledger technology and cloud computing.
Such advancements are designed to stimulate the economic motivators of automation and connectivity; however, this also poses risks involving disruption, confidentiality and suppliers.
The survey noted that 30 percent of captive use was intended as a form of protection against such risks, whereas 37 percent cited both greater control of insurance programmes and meeting cost efficiency targets as the reason for captive use of cyber risks.
Furthermore, 26 percent of surveyed captives affirmed that they had suffered a cyber loss, 29 percent of which admitted a full limit loss.
However, Aon cited some positive statistics, noting an increase in the volume of captive premium growth for cyber risk of 263 percent, linked to, but not directly caused by, an uptick in capital investment.
The survey also highlighted healthcare and energy as leading industries in cyber risk captives.
It predicted that, in 5 years time, 34 percent of all captives will be underwriting cyber, which can be achieved through integration of cyber risk into a wider framework of risk management, increased capacity allocated to coverage components, and an industry shift in asset value from tangible to intangible.
John English, CEO of captive and insurance management at Aon, said: “Captives continue to play a valuable role in addressing emerging risk issues for all companies.”
“Our survey demonstrates that a captive not only can provide access to innovative coverage and unlock additional capacity for this fast moving risk topic, but also better coordinate key internal teams in a company to improve overall capital allocation, strategic planning, and risk improvement for cyber risk.”
Global practice leader for cyber solutions at Aon, Adam Peckman, added: “Driven by the digital economy, cyber remains one of the most critical risks facing all global businesses.”
“It is critical that cyber risk is treated as an enterprise risk and framed within the existing risk management framework. Risk managers can lead this change by utilising captives as a key strategic tool to demystify cyber risk through more sophisticated analysis and drive more fit-for-purpose balance sheet protection.”
