The cyber risk insurance market is experiencing rapid development, with the size of global gross written premiums growing from US$850 million in 2012 to an estimated US$2.5 billion in 2014, according to a new report by London-based business intelligence company, Timetric.
While the cyber risk insurance market is gaining traction due to a growing number of cyber attacks and the increasing reliance of businesses upon technology for operational capabilities and storing data, insurance firms are responding slowly to this rising demand, said the Timetric insight report, titled “The Future of Cyber Risk Insurance.”
“Total global losses from cyber crime stood at US$445 billion as of June 2014. With governments becoming increasingly involved in cyber threats, the prospect of compulsory cyber risk insurance could become a reality. It would have a transformative impact upon the market and could create a strong source of future revenues for non-life insurers,” commented Jay Patel, insurance analyst at Timetric.
European Demand to Grow Substantially
The demand for cyber insurance in Europe is expected to grow substantially, once the new General Data Protection (GDPR) law is finalized by the end of 2015. It is expected to come into force by 2017 in all the EU member states, making data breach notification compulsory. This will likely give more power to the regulators, along with an increase in penalties – up to EUR1 million (US$1.3 million), or 2 percent of company’s global annual turnover.
However, insurers have already experienced rapid growth in the demand for cyber-risk insurance over the last few years, the report said, noting that interest in cyber insurance has particularly grown among businesses that hold sensitive consumer information such as telecommunication companies, financial organizations and retailers.
The cyber insurance market in Europe is underpenetrated, with an estimated worth of US$150 million in gross written premiums in 2014, the report said.
In comparison, it added, the U.S. leads with approximately 90 percent of the global premiums in the cyber insurance market, which were valued at US$2 billion in gross written premiums in 2014.
“The reason why the European market is less developed than the U.S. is because of a small number cyber insurance products that are offered by insurers and less business awareness of the cyber risk problem. However, insurers are making forays to serve the European markets,” says Patel.