Global cyber insurance premiums have continued to grow despite tighter terms and conditions and stricter risk selection according to the International Association of Insurance Supervisors (IAIS). This highlights a growing demand and regulatory response.
A special topic edition of the IAIS 2023 Global Insurance Market Report said, “An expanding cyber attack surface, growing dependencies on technology and a complex cyber threat landscape contributed to an increased demand for cyber insurance products, pushing written premiums to record levels in 2021 and improving profitability.”
The report said that supervisors are actively developing and implementing macroprudential supervision frameworks for cyber risks. These include incorporating cyber scenarios in stress tests, collecting data on common vulnerabilities and supporting international initiatives to enhance the resilience of the financial sector.
IAIS executive committee chair Vicky Saporta said, “Cyber risk has become an important area of focus for insurance supervisors as it poses not only an operational risk but also an underwriting one. This report aims to offer a data-driven global perspective on the impact of cyber risk on the insurance sector and the associated supervisory responses.”
According to the report, the cyber insurance market saw substantive changes in underwriting controls, including tighter terms and conditions and stricter risk selection and underwriting standards in response to higher-than-expected ransomware losses in 2020. As a result, clients not reaching minimum cyber hygiene standards found it harder to secure coverage.
The analysis also highlights the potential catastrophic dimension that cyber risk can have and how this can pose insurability issues adding that despite this, the severity of claims related to large cyber events has been relatively low compared to those arising from natural disasters.
Most insurers included in the report have implemented various cyber security measures, indicating a positive awareness and management of their own cyber risk. The report, however, notes that the effectiveness of their cyber security frameworks is difficult to evaluate due to data gaps and jurisdictional differences.
The report also reveals that global shortage of cyber security professionals compounds the cyber operational risks that insurers face. M