A good deal of time has passed since major insurers and reinsurers began to devote significant time and resources to the opportunities and threats posed by cyber and digital.
As with any new risk, the industry sniffs around the problem, comes up with an initial strategy and, after enough time has gone by, settles on a workable long-term strategy.
Therefore, it was very interesting to see that Hannover Re had decided to combine its cyber and digital underwriting expertise in what it describes as a ‘new specialty reinsurance business unit’.
And the reinsurer was quite candid about the motivation behind this move, which was ‘to boost further development and scaling of profitable business opportunities in cyber and digital’. The new unit is being pitched as a business partner for InsurTechs and clients seeking coverage for cyber risks ‘both in treaty and facultative reinsurance’ and will enable it to ‘scale its cyber retrocession capacities’.
It will be interesting to see if other reinsurers – especially those most active in the MENA region - will mimic this development as the digitalised global economy sees insurers playing a larger and larger part when protecting businesses against the cyber risks they face.
Insurers through their expertise, collaborative networks and clear focus on data analytics, risk quantification and accumulation modelling, have a deep understanding of the threat landscape and the limits of insurability.
Interestingly enough, Hannover Re’s compatriot reinsurer, Munich Re, has just published a new report Cyber Insurance: Risks and Trends 2024 which says that the cyber insurance market has further matured further and its focus remains on meeting the increasing demand and managing dynamic risk exposures.
Munich Re also sees room for business growth – as its CEO reinsurance Thomas Blunck said, “There is still too high a proportion of uninsured cyber risks. According to our current global cyber survey, 87% of managers surveyed state that their company is not adequately protected against cyber risks. Risk awareness and demand will continue to rise, also against the backdrop of a rapidly growing threat from aggressive cyber criminals, recent technologies and dependencies, as well as geopolitical crises.”
While the business world frets about the potential risks and opportunities offered by generative AI – and the role that it might play in cyber crime – it looks like the honeymoon period may be coming to an end – leaving insurers with a very pressing need to fine-tune their cyber and digital strategies.
Whether those strategies involve the use of generative AI itself remains to be seen. There is a small but growing body of opinion that suggests that generative AI is simply overblown hype and that it will never become the transformative technology that its acolytes proclaim.
What is certain is that the risk of cyber is very real and growing. The world’s leading reinsurers are showing the way and the insurance industry in the MENA region – particularly in the UAE and Saudi Arabia – are paying very close attention. M
Paul McNamara
Editorial director
Middle East Insurance Review