The days where insurers would blindly underwrite cyber risks just to expand on their portfolio of products are now far gone. One of the effects of an increasingly digitized world is that cyber risks are increasing as well.
The global cost of cybercrime will reach USD 2 trillion by 2019, a threefold increase from the 2015 estimate of USD 500 billion. This figure could well be the top of the iceberg as according to “The Global Risks Report 2016”, a major portion of cybercrimes go under the radar.
“We're in the stone age of cyber security. Real learning will only come after the 1st major incident.”, those were the words of Dr Christopher Frei, Secretary General of the World Energy Council back in April 2016.
The latest cyber-catastrophe is undeniably the WannaCry Cyber-Attack, which affected primarily hospitals and car manufacturers. It only took a single vulnerability in Windows machines to spread malware to over 300,000 devices in 150 countries via emails. The damage was not deemed significant as ransom payments have amounted to only around USD 80,000 so far, all paid in Bitcoins.
Ransom payments represent only a fraction of the net losses insurers stand to lose. The (re)insurance market will likely respond to this event by prompting policies and relevant insurance coverage for incident responses, business and data interruptions.
The cyber risk insurance market generates about USD 3bn to USD 4bn in premiums annually, but Allianz expects it to reach USD 20bn by 2025, making it one of the fastest growing segments of the industry.