The cyber re/insurance market continues to be dominated by the U.S, but markets in Asia are beginning to see steady growth, which is likely to accelerate as new regulations are implemented and as understanding of the risk develops, according to analysts at reinsurance broker Guy Carpenter.
Approximately 85% of global cyber insurance premiums of between US $2.5 billion and $3.5 billion are generated in the U.S and the take up rate for this line of business in Asia is still relatively low, Thomas Herde, Head of Casualty Specialty, Asia Pacific for Guy Carpenter noted.
However, Japan’s cyber re/insurance market has experienced strong growth for the past 24 months, and this trend is likely to spread to other Asian markets as exposure to legal developments like the European GDPR increases.
At the same time, further high-profile cyber attacks are likely to signal a shift in priorities as insurers and clients become cognizant of the fact that a country border will not stop a cyber virus from travelling through networks.
“Not every insurer in Asia wants to allocate resources and expertise to the development of its own cyber product,” said Herde. “Instead, it may be able to enter into a co-operative agreement with a so-called ’White Label’ or ’Turnkey’ cyber carrier who will provide product, rating and claim handling expertise/services along with access to the carrier’s world-wide emergency incident response service.”
“Other insurers may prefer to develop their own products and will seek the proper sales channels and strategy to increase client awareness of their offering,” he added.
Regardless of whether an insurer opts to develop their own products, it will likely be exposed to silent cyber risks, Herde noted, which refers to instances where cyber perils are not explicitly included or excluded from a policy.
In conjunction with silent cyber exposure, insurers will need to address how to control their cyber accumulation risk, which arises when a number of individual risks are correlated.
“The capabilities to model silent cyber have been very limited,” said Herde. “Some cyber models have no or only a small number of silent scenarios incorporated. Others are also limited in terms of scope of coverage – they do not capture the business interruption element that is arguably a critical component.
“Therefore, most insurers evaluate their silent cyber exposure by way of scenario; for example, Lloyd’s Business Blackout Scenario. The situation on the affirmative side is more positive; various tools exist and insurers use these models for their portfolio steering and accumulation control.”
Herde added that Guy Carpenter is working to help its clients manage both affirmative and silent cyber accumulation, and is committed to delivering innovative cyber reinsurance solutions such as the recent cyber risk modelling platform it developed in partnership with CyberCube Analytics.