Corporate clients, small and medium-sized enterprises (SMEs) and banks are increasingly vulnerable to cyber-attacks and operational incidents, according to a new report from Morningstar DBRS, resulting in a growing demand for cyber protection. This, they add, will likely continue to fuel the already-growing cyber insurance market.
“As corporates and SMEs continue to digitize their operations and expand their reliance on third-party vendors and cloud services, their exposure to sophisticated cyberattacks has escalated sharply. Cyber risks constitute one of the largest emerging threats to banks and potential source of financial instability,” they write in the commentary report, Cyber Insurance: A Tool to Mitigate Increasing Cyber Threats to Corporates, SMEs and Banks. “Cyber insurance could be an effective tool for large corporates, SMEs and financial institutions to manage cyber risk.”
Citing research from IBM, they add that the global average cost of a data breach reached $4.88-million (all figures in U.S. dollars), a 10 per cent increase over the previous year. Focusing specifically on Europe, they also add that ransomware continues to dominate the attack landscape. Cyber insurance gross written premium (GWP) globally, meanwhile, increased at a compound annual growth rate of 16 per cent in the past five years.
“Advanced phishing (a fraudulent technique used to acquire users’ sensitive data) and credential theft, often coupled with lateral movement and ransomware deployment, were the most prevalent techniques leading to system-wide compromise. Consequences are often more severe for SMEs, which are more likely to be targeted by malicious cyber threats and less able to defend themselves,” they write. “The fast-growing cyber insurance market represents an opportunity for insurance companies to increase revenue generation and diversify their business.”
That said, they add that they expect the market to continue to be dominated by large global players – they name Beazley, Chubb, Munich Re, AXA and Fairfax, the top five insurers by GWP in the cyber insurance business worldwide. Together they generate around 30 per cent of total GWP.
