Last weekend’s devastating global ransomware attack has refocused attention on the need to mitigate against growing risks of cyber threat with greater protection and re/insurance cover, and prompted a cybersecurity stock purchase by European investors.
The cyber attack locked up more than 200,000 computers in over 150 countries – disrupting hospitals, businesses, factories, and school operations across Europe, Asia and Russia; resulting in business interruption costs estimated to be in the billions of dollars.
Although today the speed at which the virus has been spreading has slowed, cybersecurity experts are still battling to get the ransomware attack under control.
Reinsurance giant Munich Re told Reuters the recent ‘WannaCry’ ransomware attack fallout is “manageable” for the global re/insurance industry; “Insurance can help companies cope with the consequences of such attacks and contribute to prevention through risk analysis, insurance companies can make an important contribution here,” said Munich Re, commenting on the incident.
Cyber risk has been one of the hottest topics in the re/insurance industry, with re/insurers racing to develop new models and products to provide cover for cyber threat – recognised as a top risk to businesses in Europe and the U.S., and now with attacks like these, increasingly across the globe.
“These attacks help focus the minds of chief technology officers across corporations to make sure security protocols are up to date, and you often see bookings growth at cybersecurity companies as a result,” said Neil Campling, head of technology research at Northern Trust, Reuters reported.
The attack underlines the greater collaboration required between the primary market and reinsurance capacity to offset the complex, costly and far-reaching impact of cyber risk, and the need to develop innovative solutions.
Reinsurance expert and Head of Analytics, JLT Re, David Flandro, recently commented on the challenges of a proper response to cyber risk; “Companies face challenges in understanding their exposures and the type of insurance cover needed as the underlying drivers of cyber risks frequently change, requiring insurers and brokers to explain and quantify these exposures as clearly as possible.
“Increased coordination and collaboration between key markets will be crucial in meeting evolving demands and unlocking the huge potential associated with cyber for the benefit of companies and carriers alike.”
Chris Bennett, Partner, London Market & International Non Marine, Cyber Treaty, JLT Re, explained that “there is sufficient reinsurance capacity for the current cyber insurance market and increased reinsurer appetite for cyber risk bodes well for long-term growth prospects.
“New approaches have emerged in recent years as competition between reinsurance companies has stiffened, making non-proportional structures such as excess-of-loss, stop-loss and aggregate covers as commonplace today as the more traditional quota share arrangements.”
And although the cyber re/insurance market has matured and expanded in recent years, with this year so far showing a clear re/insurance emphasis on tackling cyber risk with innovation and new cyber cover solutions, re/insurance players must now take greater strides to respond to the changing dynamics of cyber attacks.
This is underlined by the severity of the recent global ransomeware attack, and the increased frequency of data breaches over the last five years, as businesses increasingly turn their focus to cybersecurity and risk mitigation.