Cyber Insurance: Growing and Innovating

The Internet of Things (IoT) is expanding rapidly–even permeating the minds of five-year olds.

My own Kindergartener’s query from the back of the car during a routine drive to swim class the other day is a good example:

“Mummy, how did God know to create all these things that we need?” As I paused to consider the appropriate response, he answered for me: “You can just ask Siri, or Google it.”

Just how far we’ve come in our technological transformation is reflected by the development of innovative insurance products to cover the associated–and growing–risk.

A new white paper from the Insurance Information Institute (I.I.I.) Cyber Risk: Threat and Opportunity which I co-authored with I.I.I. president Dr. Robert Hartwig, offers us a glimpse of how cyber insurance has evolved as a product since the mid- to late-1990s.

From a coverage that has its origins in the so-called “Y2K” or Millennium bug that prompted fears the Year 2000 date change would cause widespread computer failure, cyber coverage in the U.S. took off in response to the enactment of numerous privacy and data breach notice laws across the country.

More than 60 insurance carriers now offer stand-alone cyber insurance policies, the I.I.I. says, and interest in this coverage continues to grow following numerous high profile data breaches. Broker Marsh estimates the U.S. cyber insurance market was worth over $2 billion in gross written premiums in 2014.

And while there are many guesstimates out there, PwC suggests the global cyber insurance market could grow to at least $7.5 billion in annual premiums by the end of the decade. PwC also suggests insurers need to move quickly to innovate before a disruptor such as Google enters the market.

No business or industry is immune from the cyber threat.  Our paper takes a look at where the threats are coming from and  the challenges that cyber insurers face writing this coverage given  the rapidly evolving nature of cyber attacks.

How insurers manage these risks while creating products for this multi-billion market opportunity as the legal and regulatory landscape becomes more defined will determine how best we all are protected from cyber risks in the years to come.

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