Graeme Newman, Chief Innovation Officer at CFC Underwriting, warned in a recent interview that the next global WannaCry cyber attack could cost the industry up to $2.5 billion, Bloomberg reported.
“It’s exceptionally likely that we will see an event over the next months that will seriously affect insurers,” said Graeme Newman, in an interview.
“It would only need a combination of WannaCry’s wide reach and Petya’s destructive force to cost cyber insurers something like $2.5 billion, or a full year of gross premium income in the market,” Newman continued.
He explained the reason the insurance sector was largely spared from the last global WannaCry attack, was down to the U.S., which makes up for 90% of the global insured cyber market, being largely spared from its impact.
In the future, re/insurers are not likely to get off as easy with chances being high that hackers develop more dangerous tools to freezing computer access and locking systems.
Thomas Seidl, an analyst at Sanford C. Bernstein in London, said that it would be a matter a time before the industry sees a billion-dollar cyber claim, adding “the insurance market is well positioned to absorb that. Everybody has exposure to cyber risks and the best precaution can’t eliminate that, so there is a strong demand for insurance making cyber coverage by far the biggest opportunity for non-life insurers for the next years,” Bloomberg reported.
According to Munich Re estimates, the global cyber market could grow from last year’s $3.4 billion in premiums to between $8.5 billion and $10 billion by 2020.
And as cyber cover offers become more commonplace and competitive with increasing numbers of market entrants, prices have been falling; Newman suggested they’ve dropped by about 10% in the U.S. and about 20% in the international market this year so far.
This raises concerns over the question of whether regulators will catch up fast enough and how the next global attack could impact the industry as it moves from fledgling stages of cyber cover to market growth and more sophisticated offers and understanding of the risk.
Willis Re Chief Executive Officer (CEO), John Cavanagh, recently said that as cyber risk becomes one of the reinsurance industry’s biggest challenges and opportunities, and understanding of the risks improves, creating a cyber reinsurance market large enough to absorb the wealth of excess industry capital is achievable.
Cavanagh also noted the broad and costly impact of the recent WannaCry ransomware attack, stating the event “shone a bright light on the potential for the cyber reinsurance market.”
However, by its very nature cyber is an extremely complex risk, and the risk transfer market is yet to get to grips with how best to understand, model, manage, and ultimately protect against cyber risk, and cyber risk accumulation.
And although the industry is innovating in response to market growth for the risk, as is seen in the U.S. in particular where re/insurers are transitioning from underwriting cyber as an add-on policy, to underwriting as a standalone risk, cyber attacks such as the recent WannaCry ransomware have clearly demonstrated that self-propagating cyber exploits could become major sources of aggregated losses for the insurance and reinsurance industry.