Why cyber insurance is set to surge in the APAC
CYBERCRIME is on the rise and could cost businesses trillions over the next three to five years, according to different research and analyst groups.
As a result, it’s only natural that business leaders are exploring cyber insurance — whether it can protect them and what it can do for them.
A single system breach or malicious ransomware is all it takes for a business to lose the consumer’s trust, and cyber insurance can help shield them from the potential economic damage a data breach could inflict.
While protecting the business from an impending cyberattack has become a bigger priority among executives, one KPMG study last year revealed that there is a downward trend in the number of IT leaders claiming to be prepared for cyberattack – one in five currently.
A series of high profile breaches, such as the data hack of Marriot International, as well as the WannaCry and NotPetya malware attack in 2017 which affected companies worldwide, have lent further credibility to the notion.
And according to a recent Accenture report, in the next five years, cybercrime could cost businesses upwards of US$5.2 trillion in lost revenue, among other additional costs.
A growing need for insurance
In their report titled Bashe attack: Global infection by contagious malware, the Cyber Risk Management project (CyRiM) highlighted that a large coordinated cyber attack could cost up to US$193 billion in economic damages while maximum payout by insurers will amount to no more than US$27 billion.
The difference, US$166 billion, means that 86 percent of the total economic losses possible, are uninsured.
These risks of damages and incidents of attacks are spurring the rapid growth of the specialist cyber insurance market, and the demand is especially more telling in Asia.
According to the CyRiM report, there is an 87 percent increase in cyber insurance take-up in Asia in 2017, and current premiums are estimated to be US$50 million.
While up to 20 percent of Asian companies are currently insured against data breaches, the report states that premiums could be expected to anywhere between US$500 million and US$1 billion by 2025.
Additionally, only 8 percent of companies in the region are insured against a malware attack, and CyRiM expects more companies to take up standalone cyber insurance.
Several countries in the Asia-Pacific Economic Cooperation (APEC) have adopted the APEC Cross-Border Privacy Rules and Privacy Framework, and with EU’s GDPR now in effect, the increased regulation will only boost cyber insurance uptake.
In short, the growth of the cyber insurance market is inevitable.
As part of comprehensive risk management and contingency plan, enterprises should figure out which risks to take on, avoid, or transfer.
By taking an up an insurance premium, the risk of cyber attacks could be transferred.
Meanwhile, the increased demand and development around cyber threats also present the insurance industry with an opportunity to develop new offerings.