Cyber liability insurance is important for many businesses as a cyber attack can be devastating to a company, both for financial reasons and reputation reasons.
High-profile computer breaches like the hack of the Democratic National Committee and the Twitter Swastika Hack are reinforcing the need for protection against cyber threats. Current predictions see premiums for cyber liability tripling over the next four years.
The demand for cyber insurance could also see an increase as rules, which are due to be introduced next year by the European Union will require companies to report any cyber breaches to regulators and affected individuals.
“Cyber risk has become a boardroom issue over the past years, following some high profile hacker attacks,” Paul Bantick, head of cyber insurance at Beazley, said in an interview. “We haven’t seen the big breaches at the retailers such as in 2015 or the large health-care breaches that occurred in 2016. Yet, there’s still a high frequency of smaller losses.”
In 2016, cyberattacks that involved ransomware (criminals use malicious software to encrypt a user’s data and then extort money to unencrypt it) increased 50%. Criminals have shifted from going after individual consumers to attacking vulnerable organisations and businesses. Government organisations were the most frequent target of ransomware attacks and were followed by health care businesses and financial services.
Compared to natural disasters, cyber crime is seen as quite a recent threat and companies have not had as much time to prepare for this.
One concern is that a global cyber event such as a devastating virus spreading from Asia to Europe and the U.S. or a global cloud computing provider breaking down could affect a large number of companies covered by one insurer.
“A hurricane with a probability of happening once in 25 years could cost us as much as $150 million and the whole industry about $30 billion,” said Hiscox CEO Bronek Masojada in an interview. “Due to the lack of history, the question with cyber is whether a $30 billion loss happens once in 25 years or once in 100 years. The most important question is whether we will be alive after it.”
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