May 7, 2018
How Insurtech Boosts Cyber Risk
As the world becomes more connected, cyber risk appears as a bigger threat on the digital transformation journey of insurance companies.
As the world becomes more connected — with billions of sensors, connected machines, totally digital processes, trillion terabyte of new data and strict regulations on data privacy — cyber risk appears as a bigger threat on the digital transformation journey of insurance companies.
Cyber risk was always there, and companies managed it without detailed policies or billion dollar covers. But, the situation is changing dramatically. In our century, managing cyber risk is a full-time job and requires big budgets. Gross written premium in 2017 for cyber risk policies was nearly $3.1 billion, and it is expected to reach $14 billion just in five years. Insurance professionals expect rapid growth because cyber risk is now threatening not just financial statements but also the existence of companies from every business.
Managing cyber risk seems still like maiden soil. There are covers for business interruption, reputation loss and possible physical damages, but it is obvious that there is a lack of clear understanding about how much cyber risk policy owners have. Cyber risk management is still in the very early stage: I don’t know what I don’t know!
See also: Urgent Need on ‘Silent’ Cyber Risks
As a result of new capital regimes and strict regulations, like GDPR, Solvency II and MiFID II, there is a remarkable increase in sales and acquisition activities among companies from every sector, and cyber risk appears as a new key indicator during M&A due diligence processes, as well.
Four or five years ago, cybersecurity due diligence consisted of asking few questions in a short phone call. Now, cyber risk management can lead to the termination of an M&A deal in a few days or a sharp reduction in price. So, insurers appear as due diligence partners.
As all we know, the acquisition of Yahoo was radically changed right after Verizon Communications learned about how 3 billion Yahoo accounts were stolen. When Home Depot was preparing an offer for the Company Store, Home Depot discovered that e-mail and payment card information for as many as 56 million customers was stolen.
Cyber risk is climbing to the top of CEOs’ nightmares, and insurtech is a trigger — it is also the best tool for managing cyber risk.