Swiss Re proposes solutions to cyber uninsurability
Swiss Re has proposed three solutions to tackle the problem of cyber insurability, which is a key obstacle to the growth of the cyber insurance market.
Global cyber insurance premiums reached about $10bn in 2021, and Swiss Re forecasts this figure to grow to $23bn by 2025. However, this implies a massive protection gap, as global cyber losses currently stand at almost $1trn.
Swiss Re writes about €600m of cyber premium, about 80% of which comes from reinsurance, and the remainder from primary.
The first solution that Swiss Re is proposing involves standardising data and optimising modelling. This, the carrier said, should improve cyber data, which in turn would allow meaningful risk insights and enable more accurate pricing and modelling.
The carrier also urged re/insurers to invest in cyber talent to help strengthen the actuarial and technical skills needed for forensic analysis. When CyberInsurer.com caught up with Swiss Re at the Monte Carlo reinsurance conference, the firm was emphatic that it would continue to invest heavily in understanding the risk before building out its cyber book.
The second solution involves updating policy language for clarity and consistency.
Swiss Re wrote: “The relative youth of the cyber insurance market and complexity of the risk are reflected in a lack of standardisation around exclusion clauses and terms and conditions. Uncertainty about responsibilities in the event of a cyber catastrophe remains a barrier for additional industry capacity. Stakeholders have taken steps to fix some of these issues, but factors such as attribution of cyber events remain a core problem.”
Finally, the carrier proposed identifying new sources of capital to address the protection gap.
It suggests a public-private partnership (PPP) insurance scheme, where the coverage of systemic risks is split between insurers and a government-backed fund may be one option. Another would be to tap into the market for insurance-linked securities
Jérôme Haegeli, Swiss Re group chief economist, said: "As cyberattacks have increased, so has awareness of the risk – and with it, demand for cyber insurance is growing. However, due to the high degree of uncertainty regarding expected losses and the evolving nature of the risk, its insurability is limited. This in turn restrains market capacity, leading to a protection gap of around 90%."
