Insurers brace for catastrophic cyber event
Ransomware might be the most financially devastating potential source of such an event.
A report by Guy Carpenter predicts the potential impact of a catastrophic cyber event occurring ‘once in 200 years’ on the cyber-insurance sector. The report incorporates data from nearly two million cyber policies and employs three modelling platforms to estimate potential losses, specifically focusing on cloud outage, data theft, and ransomware/malware scenarios.
According to the report, ransomware is identified as the most financially devastating potential source of a major cyber incident, with losses estimated to exceed $30 billion by CyberCube. The models also indicate relatively lower loss levels for cloud events due to the robust contingency measures adopted by cloud providers. However, opinions diverge among the modelling vendors regarding the significance of data theft events within the 200-year return period.
The estimated losses in the report pertain only to organisations with insurance policies that would be liable for payouts, reflecting the recent growth in the cyber-insurance industry. This sector currently holds global premiums worth $14 billion, with the US market accounting for $9 billion. This represents a substantial increase from the $2.6 billion recorded in 2019 for the US market.
The report highlights various factors contributing to the increase in risk surrounding catastrophic cyber events. These include heightened dependence on cloud infrastructure, greater interconnectedness of systems and devices, the emergence of more sophisticated cyber-attacks, and stricter regulatory requirements.
Despite the potential impact of a significant global cyber event, Guy Carpenter concludes that the cyber-insurance sector possesses the resilience necessary to absorb such losses. The report argues that although hypothetical losses would undoubtedly affect the market, the industry has previously demonstrated resilience to significantly larger losses in other areas. Consequently, leaders and entrepreneurs within the insurance sector perceive opportunities for sustained growth and performance in this field.