Even re/insurers who do not offer cyber coverage could find themselves being impacted financially due to ambiguous policy wording, according to data and analytics firm GlobalData.
Analysts noted that re/insurance firms may find themselves exposed to cover the cost of cyber-related claims on traditional policies such as business interruption.
The UK cyber insurance market in particular is still in its infancy when compared to more established commercial insurance markets, GlobalData said, yet the rate of growth is substantial.
Findings from GlobalData’s 2018 UK small and medium sized enterprises (SME) Insurance Survey showed that 27.2% of SMEs held a standalone cyber insurance product, representing an increase of 14% when compared with 2017.
“The considerable growth in the uptake of cyber insurance is being driven by a combination of factors,” said Daniel Pearce, Insurance Analyst at GlobalData.
“Firms’ increased awareness about their exposure to cyber risks is playing a key role. However, this awareness is not restricted to cyber insurance policyholders,” he explained.
“The percentage of SMEs that detected cyber breaches or attacks was greater than the percentage with cyber insurance in place across 2016–18. For example, in 2018, 40% of micro businesses detected a cyber-breach yet only 14% had cyber insurance in place.”
Companies are now responding to this situation – where the uptake of cyber insurance is far lower than the percentage of business owners detecting a cyber breach – by transitioning towards affirmative cyber cover, GlobalData observed.
For example, from 2020 all of AIG’s commercial property and casualty insurance policies will affirmatively cover or exclude both physical and non-physical cyber risks.
The Prudential Regulation Authority (PRA) has similarly ordered Lloyd’s and the wider UK re/insurance industry to develop an action plan for addressing silent cyber issues.
“Clearly, steps such as this, which clearly outline what cyber risks are insured, will benefit insurance providers, enabling them to exert greater influence over their exposure,” Pearce continued.
“Yet, policyholders also stand to benefit,” he added. “Moves such as AIG’s transition towards affirmative cyber insurance will help ensure policyholders have a clear understanding of which cyber perils are covered through a commercial insurance policy that is not cyber-specific.”
“This, in turn, will help businesses owners more easily identify the benefits offered by a specialist cyber insurance product.”
