Cybersecurity revenues in the insurance sector are set to grow at a compound annual growth rate of more than 10 per cent, from US$6.4 billion in 2020 to US$10.6 billion in 2025, according to GlobalData.
The data and analytics company suggests that the digital world is a ‘minefield’ for insurers as AXA, CNA Financial, Tokio Marine, and Marsh & McLennan suffer cyberattacks in 2021.
GlobalData’s report Cybersecurity in Insurance reveals that insurers must navigate the theme cautiously or risk suffering reputational damage from either a data breach, or refusing to make a cyber insurance payout.
Commenting on the report, Amrit Dhami, thematic research associate analyst at GlobalData, says: “Inevitably, the swift digital transformation of the insurance sector is driving the rise in cyber risk. The sector is rapidly adopting digital technologies including cloud, the internet of things, artificial intelligence, and data analytics to compete with insurtechs, meet consumer demands for personalisation and convenient digital interfaces, and in response to the COVID-19 pandemic.
“The Russia-Ukraine war has increased the likelihood of state-sponsored cyberattacks that target critical infrastructure, military operations, and businesses. Such attacks not only target insurers but lead to expensive payouts and damage the reputations of those reluctant to pay. This was the case for Ace American, which was sued by its client Merck in 2022 for failing to cover its losses during the 2017 NotPetya ransomware attack.”
Dhami concludes that cyber insurance is far riskier for insurers to provide, with some ransomware gangs reportedly targeting businesses with cyber insurance policies, as they are more likely to pay a ransom.
Furthermore, it comes as no surprise for Dhami that AXA and AIG are rethinking their cyber policies to mitigate the higher risk of a payout through higher premiums or reduced customer coverage.
“Simultaneously, fewer SMEs are looking to purchase cyber insurance due to the cost-of-living crisis and rising overheads, making it harder for them to afford the coverage. This issue is only being exacerbated by insurers putting up their cyber insurance prices.” says Dhami.
