Cyber set to become number one purchase for corporates

Cyber insurance is likely to become the single most important insurance purchase for most large corporates, according to Lucien Mounier, a cyber underwriter at Lloyd’s insurer Beazley. He predicts that standalone cyber insurance will become the backbone of many corporate insurance programmes, rather than just an extension to tradi-tional property and casualty coverages. “Companies are becoming more dependent on data and IT, and the reality is that cyber will become the main cover, not just an extension. For many firms, property will become less relevant in terms of exposure,” he told Commercial Risk Europe at the AMRAE conference last month. Mr Mounier believes property covers will reduce in relevance as companies become increasingly dependent on digital technology. “Large companies are unlikely to fail because of water damage or fire, but cyber risk does have the ability to bring down a company,” he said. Demand for cyber insurance is growing, with cover now purchased by a much broader range of sectors, according to François Brisson, global head of Swiss Re Corporate Solutions’ cyber and technology team. “The cyber insurance market has developed a lot over the past five years. It feels as if we really are in the middle of something, with increased interest from manufacturing, but also mid-market companies,” said Mr Brisson. According to Rossella Bollini, cyber underwriter at Beazley, manufacturing companies are mainly looking to buy cyber business interruption cover with wide triggers and high limits. They are also looking to access pre-incident risk management services and specialist crisis management consultants that come with breach response cover, she said. The increased interest in cyber is reflected by the success of Beazley’s year-old partnership with Munich Re, which offers broad cyber cover with large limits. According to Ms Bollini, the partnership has underwritten a number of policies, including some large US-exposed accounts with property damage and bodily injury triggers. Although 2016 was not a year of mega data breaches, cyber claim volumes continue to increase around the world, said Beazley and Swiss Re. “There have been significant claims, especially in the US. And while there has not been as much claims activity in Europe, there has been some concern with ransomware, where claims have skyrocketed,” according to Mr Brisson. Theft of personal data from retailers and healthcare companies once dominated cyber claims, but recent years have seen an increase in other cyber losses such as business interruption and extortion, explained Mr Mounier. “There has been a massive uptick in ransomware claims in the US, but also in Europe,” he said. Analysis of Beazley claims saw a quadrupling of ransomware claims in 2016, a trend that is expected to continue in 2017. Ransomware attacks are becoming more sophisticated and criminals are now targeting larger companies, including manufacturing and energy firms, explained Mr Mounier. Where ransomware attacks would previously focus on encrypted data, they are now also targeting critical business processes. Ransom, breach and business interruption costs can lead to severe losses, according to Mr Mounier. Cyber extortion is also on the rise and becoming more widespread. Cyber criminals are stealing data, threatening distributed denial of service, or target-ing business processes to extort money. Rising demand for cyber insurance has its downsides for buyers. For example, it has put cyber underwriters under increased pressure, placing more emphasis on the quality of submissions. In the past two years, cyber has been an emerging product but demand has really taken off now, according to Thierry van Santen, country manager for Allianz Global Corporate & Specialty in France. Collating cyber risk information is a particular challenge for insurance buyers, according to Mr Brisson. “Many companies are still organised in silos and it is not easy for risk managers to work with IT and operational risk departments to get the information,” he said.

Cyber set to become number one purchase for corporates

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