Cyber insurance is very popular with companies
Published: Friday, Oct 11th 2024, 10:10
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The rapid development in the digital world offers companies opportunities. But the dangers lurking in the cyber universe are also increasing. This is fuelling demand for cyber insurance, including in Switzerland.
The cyber business is still young in the insurance world, with the first policies being launched around seven years ago. Before that, cyber risks were partly covered in other lines of business, or were not explicitly excluded there.
"Insurers - also under pressure from the reinsurance industry - have reduced the 'silent cyber' cover that was dormant in the property and liability lines. As a result, they have developed independent cyber insurance policies," said Gabor Jaimes, cyber insurance expert at the Swiss Insurance Association (SIA), in an interview with the news agency AWP.
Global growth market
Since the launch of the first policies, the cyber sector has enjoyed great demand. By 2023, the global premium volume will have climbed to USD 14 billion. "And the market is likely to continue to grow rapidly," says Andreas Schmitt, cyber expert at Zurich Insurance Group, with conviction. Accordingly, Zurich estimates that the global premium volume will increase to around 29 billion dollars by 2027.
A strong growth trend can also be observed in Switzerland: According to the SIA, the premium volume increased by almost a fifth to CHF 141 million in 2023, with corporate customers accounting for the lion's share of this at CHF 121 million.
Insurers themselves are reluctant to provide information on volumes or growth in the cyber business, as a survey of industry representatives conducted by AWP shows. Mobiliar, Helvetia, Baloise and Zurich Switzerland are unanimous in reporting a sharp rise in sales figures and continued strong demand for cyber policies. "Compared to 2019, the number of policies has increased almost fivefold and the number of reported claims has increased almost eightfold," says Helvetia.
Most large Swiss companies are now protected against cyber attacks by insurance, says SIA expert Jaimes. However, the situation is different for SMEs. According to SIA figures, the proportion of companies with cyber insurance is in the low single-digit percentage range. Across all companies, the proportion is 8.7%, one percentage point higher than in 2022.
Growing risk awareness
According to Schmitt, the basis for further growth is both the increasing demand for cyber cover with new customers and the shortening market cycles. Cyber events such as the global Crowdstrike incident or news of hacker attacks on German companies are likely to boost demand.
As recently as July, a faulty update from the US cybersecurity firm Crowdstrike caused problems at airports, banks and supermarkets, as well as at the Swiss air traffic control company Skyguide. In August, mechanical engineering company Schlatter reported a cyber attack and Swisscom reported that it had fended off an attempted attack.
"Risk awareness regarding cyber protection has increased in companies, partly because more and more cases of cyber attacks are becoming known and people are reading about them," said Schmitt. And this is necessary because the security risk in the digital world is growing with the further development of artificial intelligence (AI).
Cooperation with authorities
Cyber insurance does not protect companies against all risks (see "Extra" text). "There are limits where critical infrastructures such as energy or telecommunications networks are affected by attacks and this causes business interruptions throughout Switzerland," explains Schmitt. There are also exclusion clauses for cyber warfare.
Schmitt is also convinced that it is important for the insurance industry and the public sector to work together to protect not just individual companies, but an entire country against widespread attacks. The economy needs best practice approaches for dealing with cyber risks as well as rules for collecting and exchanging data.
In Switzerland, insurance companies and banks maintain an exchange with authorities such as the Federal Office for Cyber Security (BACS) and the State Secretariat for Financial Matters (SIF) in the Swiss Financial Sector Cyber Security Center, which was founded in 2022. Finma and the SNB are also involved. However, a solution that provides for risk sharing between the public sector and insurance companies is not yet in sight.
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(Follows extra with information from private insurers on the subject of cyber insurance)
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