With losses from cyber-crime approaching $500 billion annually, insurers need to accelerate their risk modeling and product development efforts.
Zurich-based reinsurer Swiss Re reports annually on insurers’ losses from natural disasters and other catastrophes. Economic losses from disasters were relatively low in 2015; total economic losses from natural and man-made events were US $92 billion in 2015, versus $113 billion in 2014. Of that amount, insured losses were $37 billion in 2015, about 40 percent of total economic losses and well below the US $62 billion average over the last 10 years.
These are big numbers, but property and casualty insurers should be thinking about another big number: the $445 billion that the Center for Strategic and International Studies estimated in 2014 to be the global cost of cyber-crime – a number that has almost certainly grown since then. That is more than ten times the insured losses for natural and man-made disasters last year. Losses reflect the misappropriation of personal data, pilferage of intellectual property and the outright theft of financial assets.
In developed economies, the structure for insuring against catastrophes is well-developed. Insurers have gathered significant quantities of data in recent years and have created sophisticated models to evaluate risk.
By contrast, the structure for insuring against cyber-crime is in its very early stages. The indications are, however, that cyber insurance can become a very large market for insurers. Prescient carriers are devoting considerable resources to analyzing cyber-risk and to developing specialized products and services designed both to minimize cyber exposure and to provide coverage for organizations victimized by cyber criminals.
In my next post I will look at opportunities for insurers to help companies in specific industries deal with the threat of cyber incursions.
To learn more read: