Demand for cyber risk insurance market on the rise
According to a new report from Timetric, the cyber risk insurance market is experiencing rapid development, with the size of global gross written premiums growing from US$850 million in 2012 to an estimated US$2.5 billion in 2014. The cyber risk insurance market is gaining traction due to a growing number of cyber attacks and the increasing reliance of businesses upon technology for operational capabilities and storing data. However, insurance firms are responding slowly to this rising demand, and there is still number of imperfections in the market that is leading to a sub-optimal outcome.
“Total global losses from cyber crime stood at US$445 billion as of June 2014. With governments becoming increasingly involved in cyber threats, the prospect of compulsory cyber risk insurance could become a reality. It would have a transformative impact upon the market and could create a strong source of future revenues for non-life insurers,” comments Jay Patel, Insurance Analyst at Timetric.
Europe to become the next big market for cyber insurance products
The demand for cyber insurance in Europe is expected to grow substantially, once the new General Data Protection (GDPR) law is finalised by the end of 2015. It is expected to come into force by 2017 in all the EU member states, making data breach notification compulsory. This will likely give more power to the regulators, along with an increase in penalties - up to EUR1 million (US$1.3 million) or 2% of company’s global annual turnover.
However, insurers have already experienced rapid growth in the demand for cyber-risk insurance over the last few years. Interest in cyber insurance has particularly grown among businesses that hold sensitive consumer information such as telecommunication companies, financial organizations and retailers.
The cyber insurance market in Europe is underpenetrated, with an estimated worth of US$150 million in gross written premiums in 2014. In comparison, the US is leading with approximately 90% of the global premiums in the cyber insurance market valued at US$2 billion in gross written premiums in 2014.
“The reason why the European market is less developed than the US is because of a small number cyber insurance products that are offered by insurers and less business awareness of the cyber risk problem. However, insurers are making forays to serve the European markets,” says Patel.
This information is based on the Timetric insight report: ‘The Future of Cyber Risk Insurance’.