More Companies Purchasing Cyber Insurance to Stay Ahead of the Innovation Risk Curve
The speed of innovation — from mobile technology to the Internet of Things — has fostered an increasing reliance on technology for companies’ essential operations. The cyber risk conversation has likely moved beyond the boardroom to virtually every level of your organization — a good thing because nearly all your employees today have a stake in managing cyber risk. Similarly, cyber insurance continues to develop as more companies look to the coverage to address changing risks.
Standalone cyber insurance purchases among Marsh’s US clients increased 27% in 2015 over 2014, continuing a three-year trend, according to data from Marsh Global Analytics. With greater awareness of how cyber events can affect operations and critical infrastructure, companies are looking for coverage beyond indemnification for privacy breach costs.
Insurance Market Trends
Cyber insurance rates typically increased throughout 2015, though at a slower pace in the fourth quarter. The market was particularly challenging for certain industries such as retail and health care and for companies in other industries that had suffered heavy losses. The average primary rate per million rose 18.5% in the beginning of 2015 but that rate of increase fell to 12.1% in the fourth quarter.
Despite accumulating losses, cyber insurance remains readily available to many companies. Outside of high-exposure classes, insurers continue to compete aggressively for business. And overall capacity remains abundant at more than $500 million.
As cyber threats move from an issue to be fixed to a risk that needs to be managed by the entire organization, many companies are taking a more proactive approach. To better assess, manage, and respond to cyber risk, leading businesses are exploring:
- Risk modeling: Companies are increasingly interested — driven by board member demand — in cyber risk modeling tools that assess and benchmark potential threats and losses.
- Regulatory developments: In addition to a patchwork of state and federal regulations in the US, businesses also need to contend with complex regulatory regimes in the European Union and elsewhere.
- Coverage innovations: Cyber events now present threats to physical assets, operations, and intellectual property, and even bodily injury and property damage. Some insurers have enhanced existing cyber coverage to address the growing list of perils.
Even as the risk rapidly evolves, cyber risk will remain a key concern for companies today and into the future. A comprehensive understanding of evolving cyber threats and how insurance is adapting to protect against it is critical as you manage your cyber risks in 2016 and beyond