Reliance on online technology has mounted over the years, inherently increasing demand for cyber insurance. The insurance industry has been able to develop products swiftly and provide protection against cybercrime. But as reliance on online technology increases, the industry might not be able to keep pace with the growing risks of cyber accumulation exposure.
Most recently, the COVID-19 pandemic has accelerated digital adoption. Businesses around the globe have been forced to change the way they operate as remote working became widespread overnight. And remote working might be here to stay – or at least will become far more common than pre-COVID-19 times.
According to GlobalData’s 2020 UK SME Insurance Survey, the majority of SMEs (65.2%) expect post-pandemic remote working to be either at the same level as during the pandemic, higher than during the pandemic, or higher than pre-COVID-19. As such, appetite for cyber insurance has increased, particularly among larger SMEs, with a third of them now more likely to purchase cyber insurance than before the outbreak of the virus.
Lockdowns introduced to curb the spread of the virus forced non-essential businesses that could not operate online to shut their doors to customers. Businesses were interrupted for months, leaving many companies to fight for COVID-19 insurance payouts in the courts as well as for their own survival. Now imagine an event that takes hold of online technology to a similar extent that COVID-19 has done with physical outlets. Shutting online operations for a prolonged period will create huge economic damage. Undoubtedly, insurers would face difficulties affording the claims. The impact to the industry would be devastating.
Just like the COVID-19 disease, cyberattacks do not see geographical boundaries. Unlike other types of insurance, the accumulation exposure of cyber risks is not limited to one location, country, or even time zone. This presents a potential issue for cyber insurers and reinsurers. It is possible that for certain types of cyberattacks, government-backed solutions will be needed. The creation of organisations through public-private partnerships such as Pool Re would mitigate some of the cyber risks from insurers, ensuring adequate cover is provided as more businesses rely on online technology.
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