JLT Specialty, the specialist insurance broker and risk consultant, found that 74% of delegates1 polled at their annual risk & insurance conference for CTM professionals have had more contact with their CIO, COO and CEO this year, as a result of their concerns around cyber issues.
In light of a number of high profile breaches in 2014, cyber risk has risen up the business agenda as it has become increasingly clear to companies that neither size nor sector is a guarantee of protection. There is a degree of scepticism that current cyber insurance policies offer a sufficient degree of cover and, by extension, payouts in the event of a claim. Nearly half (45%) of delegates’ worries about cybercrime were not offset by the insurance cover currently available. When asked what their dream cyber coverage endorsement was, unsurprisingly 43% responded that brand/reputation would be considered the most valuable endorsement, with coverage for non-damage business interruption also rated highly.
JLT Specialty found that 42% of delegates attending the conference continued to perceive cyber-crime as the biggest threat, with concern over the theft of funds or other intangible property by malicious hackers. The potential for privacy breach was also a worrisome area with over a third (38%) of those polled citing it as the next biggest threat that kept them awake at night.
In contrast, cyber-extortion and regulation fines & penalties were much lower down on people’s agendas, receiving only eight and 12% respectively of the vote for the single biggest cyber security threat. As regulation evolves and with a decision yet to be made on the proposed EU regulation on data protection, JLT Specialty expects this to significantly increase exposures and concerns in the medium term amongst insurers.
When asked what the insurance and risk consulting industry could do to help corporates ensure they have the best protection in place, half of the delegates (49%) thought the industry should focus on “increased risk understanding”, highlighting the need to better understand emerging areas of exposure through investing in human capital, technology and analytics for the clients’ benefit. Cyber/intangible risks continued to be the main risk category of concern for the respondents, securing 42% of the vote, with property, credit, political and security risk and product recall amongst the others risks, viewed as being of less concern than cyber.
Cyber terrorism and massive aggregated losses were both equally seen to be “the next big cyber trend” by insurers and technology companies polled. The systemic exposure of the insurance and risk industry is well known in terms of the potential for massive aggregated losses. Cloud computing is one example of this exposure, where one successful attack or failure could cause losses to hundreds of thousands of parties who hold their data within the cloud, putting insurers at risk for huge claims. Furthermore, cyber terrorism outlines the requirement and demand for these policy types to respond to evolving risks and ensure cyber insurance fits with other business lines where the insured is at risk.
Sarah Stephens, Head of Cyber, Technology and Media E&O at JLT Specialty, commented:
“There is still much work to do in enhancing the general insurance coverage available to better offset cyber risks and improve our industry’s ability to communicate where the value of cyber insurance lies. While awareness of cyber security and consequently cyber insurance has risen substantially in UK companies, those buying cyber coverage remain in the minority, leaving a number uncovered and exposed to the growing risks.”
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