Advisen

Demand for cyber insurance expected to rise, but supply may lag: Willis Re survey

By Erin Ayers, Advisen

An “overwhelming majority” of respondents (86%) to a global survey conducted by Willis Re believe the COVID-19 pandemic will increase the frequency of cyberattacks and more than half (54%) think the severity will rise.

Respondents feel the greater risk of cyberattacks is likely to boost demand for coverage, but only 45% believe supply will increase. Respondents in North America were the most pessimistic, possibly reflecting “more cautiousness” in underwriting appetites in recent months, while Asia-Pacific respondents were more optimistic. All over the world, most respondents (74%) expect cyber insurance prices to rise, in keeping with a harder insurance market in many lines.

“COVID-19 has affected virtually every aspect of our daily lives. As insurance touches almost everything we do, it is not surprising that the pandemic has also had a major impact on our industry. This is especially true for cyber insurance. With offices closed and people working remotely, we are even more reliant on digital technology for business and so many other functions. This means more cyber risk,” said Willis Re in its report. Respondents included 1,000 buyers, risk managers, claims professionals, underwriters, brokers, and actuaries in 56 countries.

The reliance on digital connections also has respondents even more concerned now about the chance of a $10 billion-plus insured cyber event occurring in the next five years. Overall, one in three respondents think a cyber catastrophe could occur in the next five years, a view that has increased since the beginning of the pandemic. Willis Re noted that the fear is more prevalent in the Asia-Pacific region and lowest in Europe.

The pandemic has illustrated “the widespread and devastating economic impact of an unexpected “tail” event that pays no attention to geographical boundaries. These factors might explain a greater appreciation of the potential for a large systemic cyber loss,” Willis Re noted.

Respondents also see continued problems with silent cyber and are concerned both from a contract certainty standpoint as well as a risk aggregation perspective. Over half (57%) of respondents think the pandemic has increased silent cyber exposure.

“The pandemic has shown what happens when policy language is unclear or challenged — particularly when it comes to business interruption — and this has significant accumulation implications for insurers when it comes to cyber risk,” Willis Re commented.

Editor Erin Ayers can be reached at eayers@advisen.com.