3 Ways Insurers Can Lead in Responding to the Increase in Systemic Cyber Threats
Cyber breaches and ransomware attacks have reached an all-time high and continue to grow more sophisticated in response to attempts by the private and public sectors to prevent access to systems and sensitive data.
The Insurance Information Institute and the Identity Theft Resource Center reported that, in just the first half of 2021, there were 846 compromising breaches and data exposures, which represents 75% of all such events in 2020.
While the internet has enabled extraordinary innovation to take place, the connected nature of our society has left us vulnerable to a rising number of ransomware attacks, phishing emails and other IT crimes our industry’s stakeholders need to manage.
Exposures have increased amidst the pandemic as businesses shifted to remote working and more transactions were conducted online, making data protection and cyber security even more critical.
Cyber crimes are expected to cost the world $10.5 trillion annually by 2025, and while the cyber insurance market is growing, there remains a significant insurance gap that needs to be filled.
Even before the onset of COVID, Lloyd’s research predicted a single, large-scale contagious malware attack could cost the global economy almost $200 billion and that over 80% of these losses would be uninsured.
The alarming increase in cyber attacks against individuals, businesses and infrastructure have also disrupted society in ways not previously experienced.
The insurance industry has a key role to play in addressing this issue. Customers are increasingly seeking new solutions from brokers and insurers to help them assess and transfer their growing cyber risks effectively.
The insurance industry, working with its customers and research partners, can play a vital role given our vantage point observing and analyzing cyber threats around the world.
But we can do more to drive innovation and build understanding, which will ultimately help strengthen society’s resilience to these threats. There are three important ways we can do this.
1) Sharing Intelligence and Expertise Widely
We can’t solve the world’s biggest challenges without collaborating effectively between multiple organizations and across all sectors of the economy.
We need to bring together diverse perspectives, cutting-edge risk insights and cross-industry dialogue to build cyber resilience.
The insurance sector should actively share its data and insights widely and work alongside cyber security experts, industry peers, customers and regulators to create meaningful impact.
Lloyd’s Futurset initiative is adopting this approach by providing a global platform that convenes experts and research partners to develop and share insights that drive effective responses to systemic risks.
2) Underwriting New Solutions
Insurers and brokers can help customers not only model cyber risks more effectively, but we must also continue to develop this specialist area of insurance.
The Lloyd’s market is one of the global leaders in cyber insurance capacity and has expanded its share of the global market more than tenfold in the last seven years. Highly experienced cyber insurance specialists are now commonplace at Lloyd’s and in the wider industry.
Taking a snapshot of new solutions developed in the Lloyd’s Lab, our innovation accelerator in London, serves to demonstrate just how far the insurance industry has come in a few short years — from helping re/insurers to better quantify cyber risks to improving cyber insurance offerings for SME businesses and developing parametric insurance products to close protection gaps.
But there’s always more we can do on product development, underwriting and risk mitigation.
3) Working Closely with Customers on Risk Assessment and Protection
A recent Lloyd’s report highlighted how rising geopolitical tensions are increasing the threat of state sponsored cyber attacks.
Fear of escalating cyber conflict has become a constant for businesses and governments alike. And the uptick in the frequency and severity of cyber attacks, especially ransomware attacks, has rightly prompted questions about how we can better guard against them.
Robust risk management is a vital first line of defense. Increasingly, insurers and brokers are harnessing their expertise to provide clients with more informed risk management advice, which can result in significantly reduced cyber exposures.
The insurance industry has an essential role in helping to build a safer cyber future for all. And there is an opportunity for the industry to not only expand its commercial activities but also help to reduce a critical systemic risk.
By providing products and services to help de-risk these cyber vulnerabilities (for businesses and individuals), we can help to sustain the engine of economic growth at a time when we need it most. By helping to diffuse cyber threats, the insurance industry, working with governments, will help improve global economic resilience, and in the process establish frameworks to enable collaboration across current and emerging systemic threats.
We need to come together, to increase innovation and to build lasting partnerships with customers, to make this a reality. &