Cy­ber Risks

An In­sur­able Threat?

Insurance - - FEATURE - Text Mar­cus Han­rieder | Chief Ex­ec­u­tive Of­fi­cer | Mu­nich Re, Malaysia Branch

CON­SID­ER­ING THE RE­CENT CY­BER IN­CI­DENTS WORLD­WIDE, OVER HALF OF IN­SUR­ERS, REIN­SUR­ERS AND RISK MAN­AGERS IN ASIA ARE NOW MORE IN­CLINED TO PUR­CHASE CY­BER IN­SUR­ANCE COV­ER­AGE FOR THEIR COM­PA­NIES IN THE COM­ING YEAR.

Al­most 30 per­cent of them be­lieve that the mar­ket for cy­ber cov­er­age will surge by 50 per­cent in the com­ing three years. An­other 32 per­cent be­lieve in an in­crease of more than 20 per­cent in the same pe­riod.

At the same time, less than 10 per­cent be­lieve they have a suf­fi­cient prod­uct range in place, while 83 per­cent ac­knowl­edge that they’re still de­vel­op­ing new so­lu­tions and prod­ucts and/or haven’t launched any.*

The mar­ket is there and re­cent events like hacker at­tacks on Ap­ple or Sony show that even IT in­fra­struc­ture that is con­sid­ered highly se­cure is not safe from at­tack. Closer to home, Malaysia Air­lines’ home­page was at­tacked by hack­ers claim­ing to be from the ‘Lizard Squad’ group early this year. It is there­fore par­tic­u­larly im­por­tant for oper­a­tors to be able to limit po­ten­tial risks. Along­side ef­fec­tive soft- and hard­ware se­cu­rity, this is achieved by means of ap­pro­pri­ate in­sur­ance cov­er­age. Es­ti­mated growth in pri­mary cy­ber in­sur­ance mar­kets till 2020 is ex­pected to reach US$3 bil­lion (from US$0.3 – 0.5 bil­lion in 2015) with a 70/30 split be­tween mar­kets in Europe

and Asia. Mu­nich Re sees ex­po­nen­tial growth of the cy­ber in­sur­ance mar­ket in the re­gion. While the po­ten­tial is there, the cy­ber in­sur­ance mar­ket is a ma­jor chal­lenge for the in­dus­try.

OP­TI­MUM COM­BI­NA­TION OF IT SE­CU­RITY AND IN­SUR­ANCE COVER NEEDED

The tri­umphant ad­vance of dig­i­tal com­mu­ni­ca­tion tech­nol­ogy seems to be a key driver of many sud­den and un­ex­pected cy­ber threats. And the de­vel­op­ment of new tech­nolo­gies like driver­less cars creates con­stantly new risks and changes to our daily life. To mas­ter th­ese risks, it takes the ca­pac­ity to quickly iden­tify changes in risk and de­mand, and to de­velop new prod­ucts or en­hance ex­ist­ing ones. If in­sur­ers do not keep up with the pace of tech­nol­ogy, they will not be able to adapt their prod­ucts. This calls for bet­ter risk man­age­ment and cor­re­spond­ingly co­or­di­nated in­sur­ance cover. The man­age­ment must be ex­ten­sively pre­pared for such at­tacks in or­der to avert dam­age to the com­pany – and to pro­tect it­self. Pre­ven­ta­tive IT se­cu­rity is es­sen­tial when it comes to pro­tect­ing a com­pany’s sys­tems against hack­ers. But even com­pa­nies who have ex­ten­sively up­graded their se­cu­rity sys­tems must re­main alert to the pos­si­bil­ity of a suc­cess­ful at­tack, as to­tal se­cu­rity can never be achieved, not even with the best tech­ni­cal pre­cau­tions. Com­pa­nies’ core risks change as com­mu­ni­ca­tion chan­nels be­come more nu­mer­ous, en­abling both news and ru­mours to snow­ball at ever greater speeds. Fo­cuses and loss po­ten­tials shift, and risk man­agers must en­sure that cov­ers are ad­justed ac­cord­ingly. Where hack­ing is con­cerned, this means that the cover of both the cy­ber risks and the rep­u­ta­tional risks must be care­fully con­sid­ered. In­stead of in­cor­po­rat­ing th­ese risks into reg­u­lar prop­erty and li­a­bil­ity poli­cies, they could be cov­ered through in­di­vid­ual poli­cies tailored to each com­pany’s spe­cific sit­u­a­tion.

For now, we see four main ar­eas of Cy­ber in­sur­ance: At Mu­nich Re, we sup­port our clients to find so­lu­tions for data risks for pri­vate per­sons and house­holds, be it iden­tity theft, on­line shop­ping, stream­ing, loss of credit card data, neg­li­gent vi­o­la­tion of copy­rights and much more. Data breach in­sur­ance for com­mer­cial busi­ness Our rein­sur­ance fo­cus is to of­fer our clients a holis­tic un­der­writ­ing ap­proach, cov­er­ing risk as­sess­ment, pric­ing, claims and ac­cu­mu­la­tion man­age­ment for the in­di­vid­ual com­mer­cial busi­ness cov­er­ages and port­fo­lios. Data breach in­sur­ance for in­dus­trial busi­ness This is cur­rently Mu­nich Re’s core busi­ness when it comes to Cy­ber so­lu­tions. Part of it are stan­dard and spe­cial cov­ers such as cy­ber ex­tor­tion, me­dia li­a­bil­ity and rep­u­ta­tional risk cover. In­sur­ance of crit­i­cal in­fra­struc­ture Fol­low­ing re­cent so­cial and political de­vel­op­ments, this will gain im­por­tance. Crit­i­cal in­fra­struc­tures are the most pro­tected and there­fore most at­trac­tive hacker tar­gets mo­ti­vated by ei­ther eco­nomic or political rea­sons.

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