The availability of cyber insurance cover is improving but remains short of meeting demand, according to John Drzik, president of global risk and digital at Marsh & McLennan Cos. Inc.-owned insurance broker Marsh.
Brokers, including Drzik, have previously pointed out that the coverage currently on offer lags client demand and is a fraction of the total risk. Both insurers and reinsurers are treading carefully when offering cyber protection because of the large losses that could result from an event.
Speaking to S&P Global Market Intelligence at the launch of the World Economic Forum's 2019 Global Risks Report, Drzik said "there has been progress" since he made his comments last year, but added: "It still isn't entirely meeting demand."
Drzik noted improvements on three fronts: Increased underwriting capacity means that finding policies with higher payout limits is now easier; more coverage is now available for first-party risks, such as business interruption, from a market that initially focused on covering third-party data loss; and cyber insurance markets outside the U.S. are growing.
"It still is dominated by the U.S. but there is more and more coverage available internationally," Drzik said. But he added, "There is still more development required really on all three of those dimensions."
The 2019 edition of the Global Risks Report painted a picture of an increasingly risky world where the collective will to tackle the risks is diminishing. Tackling global risks requires cross-country collaboration, yet countries are becoming more insular and global relations are growing more hostile, the report said. Ninety percent of those polled in the report's Global Risks Perception Survey said they expect further economic confrontation between major powers in 2019.
Drzik said this environment presents opportunities for the insurance industry. He noted that the increased likelihood of more state-sponsored cyberattacks amid souring international relations would put cyberrisk more in the spotlight.
"For the cyber insurance area there is a reasonable amount of growth left and I think the current global risk environment is probably going to support that because it will elevate concerns," he said.
Cyber is not the only area where available insurance cover is lagging market development and where opportunity for the industry could emerge, according to Drzik. He said there could be product liability risks from new technologies such as artificial intelligence and internet-enabled devices.
The legal and regulatory framework has not yet caught up to these developments," he said, and as a result "the insurance industry has also not developed the capacity to take on these risks." However, if the legal and regulatory gray areas are clarified, "there would be new opportunities for insurance," he added.
Despite the potential for more cyberattacks, they were considered only the fifth-likeliest type of global risk by the roughly 1,000 people polled for the 2019 Global Risks Perception Survey, down from third in the 2018 report. The risk of data fraud or theft remained in fourth place.