Cyber insurance market to reach $20bn by 2025: AGCS
The standalone cyber insurance market will continue to evolve but development will bring challenges, with many concepts and wordings yet to be tested, potentially resulting in litigation. This is not unusual with new products and can improve risk knowledge.
Education – both in terms of businesses’ understanding of exposures and underwriting knowledge – must improve if insurers are to meet growing demand. Other challenges exist around pricing, modelling of risk aggregation and incidents resulting in physical damage.
The cyber insurance market is currently estimated to be worth around $2bn in premium worldwide, with US business accounting for approximately 90%. Fewer than 10% of companies are thought to purchase cyber insurance today. However, the cyber insurance market is expected to grow by double-digit figures year-on-year and could reach $20bn+ in the next 10 years.
Growth in the US is already underway, driven by data protection regulation. Legislative developments and increasing levels of liability will help growth accelerate elsewhere, as will a growing number of small- to medium-sized enterprises (SMEs) seeking cover.
Sectors holding large volumes of personal data, such as healthcare and retail, or those relying on digitalized technology processes, such as manufacturing and telecommunications, are most likely to buy cyber insurance at present. However, there is growing interest among financial institutions and the energy, utilities and transport sectors, driven by the increasing perils posed by interconnectivity.
Data protection and liability risks dominate the cyber landscape today. Impact of BI from a cyber incident and further development of interconnected technology will be of increasing concern to businesses over the next decade and will spur insurance growth.
Businesses are also exposed to cyber risk through supply chains and, increasingly, will need to consider the impact of an incident in this area, such as the liability they could face if they cannot deliver their products or lose customer data, as well as the costs to resolve such issues. Companies will increasingly look to extend protection to their supply chains.