23 March 2015 Insurance

Only 2% of large UK firms have cyber policies

Only 2 percent of large UK firms have standalone cyber policies, despite over 50 percent of CEO’s of large organisations believing they are protected.

This is the finding of a report published by the UK government and Marsh, which added that in reality, coverage is closer to 10 percent, if standalone cyber policies are combined with cyber cover that is embedded in other policies. The coverage becomes negligible when looking at small and medium-sized enterprises (SMEs).

The report also noted a significant gap in awareness around the use of insurance with around half of firms interviewed being unaware that insurance was available for cyber risk.

“Cyber attacks represent a present and growing danger that threatens businesses, irrespective of size and sector. The UK Government’s annual breach report shows that 81 percent of large businesses and 60 percent of small businesses suffered a security breach in 2014,” said the report.

However, the report rejected the possibility of a government backstop, stating that there was no conclusive evidence of the need for such a solution at the moment.

“It is possible that aggregate exposure either does already or will soon become a problem for the market to absorb, since the fact that such a risk has not yet occurred is no doubt encouraging the market to continue to grow its exposure,” said the report.

“Other challenges in creating a pool in advance of systemic claims materialising involve the definition of what events and losses would be in scope (in particular, given the complexity referred to earlier of how cyber is treated in existing policies), the lack of data to model the level and price of risk to be transferred, and a lack of consensus among insurers about the need for recourse to government support.”

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