14 September 2015 Insurance

Cyber insurance premiums could hit $7.5bn by 2020: PwC

The cyber insurance market could grow to $7.5 billion in annual premiums by 2020, according to professional services firm PwC.

In its report, Insurance 2020 & beyond: Reaping the dividends of cyber resilience, PwC added that by 2018 annual premiums could grow to $5 billion, from the current amount of $2.5 billion.

Previously, research by the professional services firm found that 61 percent of business leaders across all industries perceive cyber attacks as a threat to the growth of their business. Last year saw an average of 100,000 global security incidents a day.

Paul Delbridge, insurance partner at PwC, said: “Given the high costs of coverage, the limits imposed, the tight terms and conditions and the restrictions on whether policyholders can claim, many policyholders are questioning whether their policies are delivering real value. There is also a real possibility that overly onerous terms and conditions could invite regulatory action or litigation against insurers.

“As boards become increasingly focused on the need for safeguards against the most damaging cyber attacks, insurers will find their clients questioning how much real value is offered in their current policies.

“If insurers continue to simply rely on tight blanket policy restrictions and conservative pricing strategies to cushion the uncertainty, they are at serious risk of missing this rare market opportunity to secure high margins in a soft market. If the industry takes too long to innovate, there is a real risk that a disruptor will move in and corner the market with aggressive pricing and more favourable terms.”

PwC suggested that re/insurers can capitalise on the cyber risk opportunity whilst managing the exposures in a number of ways.

The professional services firm recommended companies maintain their own cyber risk management credibility through effective in-house safeguards against cyber attacks while also robustly modelling exposures and potential losses.

Delbridge added: “For insurers, cyber risk is in many ways a risk like no other. It is equally an opportunity. Insurers who wish to succeed will base their future coverage offerings on conditional regular risk assessments of client operations and the actions required in response to these reviews.”

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