The coronavirus crisis could be a "watershed moment" that leads to mass take-up of cyber insurance, according to Swiss Re AG's head of cyber product management.
Anthony Cordonnier told a June 25 news conference that although cyber insurance has so far been considered a low-penetration product, "we think that is really going to move from that luxury, optional purchase to a must-have" because businesses have had to shift operations online to cope with the pandemic.
The cyber insurance market has shown "very healthy" growth of between 20% and 30% in recent years, Cordonnier said. Swiss Re estimates that global cyber insurance premiums will be $5.5 billion in 2020, up from its estimate of $4.5 billion for 2019.
But Cordonnier said penetration levels were "still quite low," particularly among individuals and small to medium-sized companies. With these potential customers, Cordonnier said, a lack of risk awareness had been "a growth inhibitor." He noted that penetration among large corporates was "way over 50%."
But awareness of cyber risk is now growing, thanks to the crisis. The shift to operating online and remote working has created new opportunities for cyber criminals to attack companies and individuals.
Maya Bundt, Swiss Re's head of cyber and digital solutions, told the conference that phishing emails, for example, were now using people's fear of and thirst for information about the pandemic to tempt them into clicking links or visiting websites. In the first quarter of 2020, Bundt said, 16,000 newly registered "corona-domains" were created, of which roughly 20% were "suspicious or even malicious." At the same time, ransom demands had risen by "over 30%" to an average of $100,000, she said.
Bundt told journalists that the coronavirus had "accentuated not only the push for digitization but also the risks associated with it."
As the cyber insurance market grows, so does the need for reinsurance protection. Cordonnier said Swiss Re expected to "continue to deploy capacity in sync with market growth for the time being, so our capacity will grow accordingly."
Around 40% of cyber insurance premiums flow to the reinsurance market, Cordonnier said, adding that considering the 20% to 30% annual growth in cyber premiums, "it is no secret that additional capital will be needed in the mid- to long term to support the line of business."
Bundt acknowledged that one barrier to growing the cyber reinsurance market is the accumulation risk, as many lines of business in many geographies can be affected simultaneously by a cyberattack. But he added that alternative risk transfer solutions and government backstops, in cases where there is a high risk of cyberattacks by nation states, could have a role to play.