Cyber insurance: challenges and opportunities of an emerging market

We are facing the last stage of a changing technological shift. The internet, which used to be a place where we “went” (cybercafe), is now a ubiquitous reality in which we “live”. Our house, car, or the way in which we shop and interact with people is filled with the presence of algorithms. This trend has also been fueled by the Covid-19 pandemic. We now have a split screen existence, where part of our time takes place in the real world, and the other half is in the virtual. This technological advance, which has brought many improvements to our day-to-day lives and many incredible discoveries, has also exposed us to a new set of risks and challenges. In this article we explore what some of these are and how they affect the insurance industry, and in particular its coverage of cyber incidents.

The insurance sector has not been oblivious to this evolution. In fact, cyber represents a fast-growing market. According to Forbes in 2021, the cyber insurance industry wrote $10 billion in premiums (in comparison with the $600.000 for the year 2010). As for the future of the industry, the Swiss Re Institute, has projected that the cyber sector is expected to grow 20% annually, reaching $23 billion in underwriting premiums by 2025.

The International Association of Insurance Supervisors (IAIS) has confirmed this pattern of growth in its recently published Global Market Report (GIMAR). In particular, it has explained this growth due to “the higher frequency and severity of cyber-attacks, a greater cyber-attack surface as a result of digitalisation and remote working policies, and a riskier cyber landscape [which is] expected to continue to push demand for cyber coverage to record levels” (GIMAR special topic edition, 2023).