In response to the hardening cyber risk insurance market, existing captive owners are looking to increase the use of their captives to include additional risks while others are exploring setting up new captives, according to Grant Maxwell, global head of alternative risk transfer at Allianz Global Corporate & Speciality (AGCS).
Maxwell, who was promoted to his role in July , stated that cyber is one of the top risks that regulators see captives writing more frequently.
The use of a captive for cyber risk coverage can provide various benefits that generally come with self-insurance but also additional ones.
Maxwell said: “It’s an effective way to react to a hardening market, it aligns the cost of risk directly with the management of risk for the company and drives improved risk management and lower cost.”
“Adding cyber risk to a captive programme also supports diversification with other risks in a captive programme,” he added.
He also explained that covering a proportion of a company’s cyber exposures in a captive may improve terms of or access to traditional cyber insurance cover, due to better alignment of interests.
AGCS recently released a cyber risk trends report, where they outlined that there has been a 67 percent increase in the average number of security breaches in five years.
The study analysed 1,736 cyber-related insurance claims worth €660 million involving AGCS and other insurers from 2015 to 2020.
Maxwell highlighted that cyber is one of the top businesses globally.
Discussing AGCS’ cyber report findings, Maxwell said that cybercrime, as well as internal failures and IT glitches, bring expensive losses for companies and have caused a steady rise in cyber insurance claims over the last few years.
The huge rise in remote working due to the COVID-19 pandemic has further exacerbated the cyber risk landscape, according to Maxwell.
He said: “Displaced workforces create new opportunities for cyber criminals to gain access to networks and sensitive information.”
“Malware and ransomware incidents are already reported to have increased by more than a third since the start of 2020, while COVID-19-themed online scams and phishing campaigns about the pandemic continue,” he concluded.
As Maxwell and the AGCS report highlighted, the COVID-19 pandemic has caused more issues for cybersecurity, which Captive Insurance Times addressed in September.
