Cyber Insurance Market Growth Hindered by Uninsured Risks

Despite a maturing cyber insurance market, Munich Re's report reveals a significant gap in coverage, with 87% of decision makers feeling inadequately protected against cyberattacks.
By: | April 5, 2024

The cyber insurance market is maturing, yet a significant proportion of cyber risks remain uninsured, according to a report by Munich Re.

The report highlights the increasing demand for cyber insurance, driven by the rapid advancement of technology such as artificial intelligence and cloud technology, and the growing dependence on IT, IoT, and digital services across global industries. Despite this, 87% of global decision makers believe their companies are not adequately protected against cyberattacks, indicating a gap in the level of protection offered by the insurance industry, per the report.

The past year has seen a surge in cyberattacks, with annual ransom crypto payments doubling to $1.1 billion in 2023 from $567 million in 2022. The manufacturing sector was the most susceptible to ransomware attacks, with 67% of respondents in this sector facing such attacks. Business & professional services, retail and health care all followed with 61% of each sector facing ransomware attacks.

While ransomware dominates, other costly attack vectors include business email compromise (BEC) and supply chain attacks, Munich Re noted.

Looking ahead, Munich Re predicts that artificial intelligence will shape the threat landscape in 2024 and beyond. AI is expected to automate and personalize cyberattacks, making them cheaper and faster to distribute. However, AI will also augment the efforts of cyber defenders, improving detection and response capabilities.

“In terms of AI’s impact on cybersecurity, Munich Re experts expect cyberattacks to become increasingly automated and personalized, as well as cheaper and faster to distribute at scale in all languages. For example, attackers are using AI driven phishing e-mails and vishing calls to scam victims,” the report stated.

Stefan Golling, Board of Management member responsible for Global Clients and North America, emphasized the importance of expertise and knowledge in understanding and underwriting cyber risk. “Technological developments, especially the potential use cases of AI, will also change the insurance industry. Nevertheless, our investment in talent, expertise and knowledge to ensure an excellent understanding and underwriting of cyber risks remains a central pillar of Munich Re’s business,” he said.

The rise in nation-state cyber activities and disinformation poses a serious threat to cybersecurity globally. The potential social, economic, and geopolitical impact could be enormous. In addition to disinformation, misinformation will become a costly threat to risk owners.

Cyber Market Outlook

The global cyber insurance market, currently worth $14 billion, is expected to double to $29 billion by 2027, driven by the escalating frequency of cyber-attacks and growing regulatory requirements, according to the report.

The cyber insurance market has nearly tripled in size over the past five years, largely due to the commitment of reinsurers and the emerging interest from capital markets in cyber risks. Despite this, only a fraction of the risks has been insured so far. Large corporations still account for the majority of premiums, while small and medium-sized enterprises (SMEs) largely bear their cyber risks independently.

The report highlights the significant challenge insurers face in bridging the gap between economic losses and insured losses. “Given the very dynamic growth of risks in a digitized economy, higher insurance penetration for cyber risks is the paramount aim,” the report states.

The projected growth of the cyber insurance market indicates a significant opportunity for insurers to expand their services and reach, particularly towards SMEs. The increasing sophistication of cyber-attacks and their potential financial repercussions underscore the need for airtight cyber insurance policies.

The report’s findings also suggest a broader trend in the insurance industry towards recognizing and addressing the evolving risks associated with digitalization. As cyber threats continue to grow in complexity and frequency, the demand for cyber insurance is likely to rise, providing a fertile ground for the growth of the cyber insurance market.

Access the full report from Munich Re here. &

The R&I Editorial Team can be reached at [email protected].

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