Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Current cyber insurance model is broken and ripe for data-driven change
InsurTech Insights | Dec 5, 2021
As the cyber risk environment evolves from occasional data theft to rampant extortion, cybersecurity experts believe that the current cyber insurance model – where policies are easily accessible – is ripe for a change.
This comes as several insurance providers have decreased coverage and pushed up rates in recent years as a surge in ransomware attacks have left them smarting from hefty payouts.
See: Here is why InsurTech is heating up as an investment category
One of these insurers, Lloyd’s of London, which accounts for almost a fifth of the global cyber insurance market, has reportedly discouraged its syndicate from taking cyber business next year, according to Reuters.
“Cyber insurance was only ever meant to be for a novel, an unforeseen catastrophic event,” Jess Burn, senior analyst at advisory firm Forrester, told SC Magazine. “When things like ransomware were limited to someone’s grandmother on their old PC, that was a license to print money. But now that music has absolutely stopped and they’re reeling from those losses.”
Data from market intelligence firm S&P Global has shown that the loss ratio from cyber insurance has risen in recent years. From 43 cent for every dollar in 2016, the figure has jumped to 73 cents per dollar in 2020.
Industry insiders that SC Magazine interviewed said that the cybersecurity sector responded by “trying to consolidate data aggregation to create a more sustainable industry.” This led to the formation of CyberAccuView, a data-sharing service aimed at creating a more standard practice.
See: Synthetic Media and Deepfakes: An insurance industry threat
However, the experts still predict that policies will be dependent on “higher base security standards offering lower maximum payouts.”
They added that “a new breed” of fintech firms that are placing emphasis on data-driven security policies, including the use of network monitoring software, can help create a sustainable model for cyber insurance.
“We see a positive trend in the cyber insurance market where organisations embrace the risk assessment process required by insurers as an opportunity to justify and accelerate cybersecurity initiatives,” Chris Reese, head of insurance at Cowbell Cyber, told SC Magazine. “Many businesses welcome the resources provided by cyber insurance providers to help them achieve insurability.”
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