- Allianz report highlights that cyber risks are evolving far beyond privacy or reputational issues
- Global cyber insurance market forecast to grow to over $20 billion by 2025
- Interconnectivity of devices and businesses drives new risk exposures with business interruption a key vulnerability, and catastrophic scenarios a possibility
- Complexity of risk means businesses need to develop a cyber security culture with different stakeholders sharing risk management knowledge
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Businesses must prepare for a new generation of cyber risks which are fast evolving, moving beyond the established threats of data breaches, privacy issues and reputational damage to operational damage, business interruption and even potentially catastrophic losses.
In a new report – A Guide to Cyber Risk: Managing The Impact of Increasing Interconnectivity – specialist insurer Allianz Global Corporate & Specialty (AGCS) examines the latest trends in cyber risk and emerging perils around the globe. Cyber risk is a major and fast-increasing threat to businesses with cyber-crime alone costing the global economy approximately $445 billion1 a year, with the world’s largest 10 economies accounting for half this total.
“As recently as 15 years ago, cyber-attacks were fairly rudimentary and typically the work of hacktivists, but with increasing interconnectivity, globalization and the commercialization of cyber-crime there has been an explosion in both frequency and severity of cyber-attacks,” says AGCS CEO Chris Fischer Hirs. “Cyber insurance is no replacement for robust IT security but it creates a second line of defense to mitigate cyber incidents. AGCS is seeing increasing demand for these services, and we are committed to working with our clients to better understand and respond to growing cyber risk exposures.”
Tougher regulatory regimes and new cyber perils
Connectivity creates risk
Catastrophic event
Stand-alone cover
Allianz also predicts that the scope of cyber insurance must evolve to provide broader and deeper coverage, addressing business interruption and closing gaps between traditional coverage and cyber policies. While cyber exclusions in property and casualty policies are likely to become commonplace, standalone cyber insurance will continue to evolve as the main source of comprehensive cover. There is growing interest among the telecommunications, retail, energy, utilities and transport sectors, as well as from financial institutions.
Education – both in terms of businesses’ understanding of exposures and underwriting knowledge – must improve if insurers are to meet growing demand. In addition, as with any other emerging risk, insurers also face challenges around pricing, untested policy wordings, modeling and risk accumulation.
Responding to cyber risk
The AGCS report highlights steps companies can take to address cyber risk. Insurance can only be part of the solution, with a comprehensive risk management approach being the foundation for cyber defense. “Once you have purchased cyber insurance, it does not mean that you can ignore IT security. The technological, operational and insurance aspects of risk management go hand in hand,” explains Jens Krickhahn, expert for cyber & fidelity at AGCS Central & Eastern Europe. Cyber risk management is too complex to be the preserve of a single individual or department, so AGCS recommends a ‘think-tank’ approach to tackling risk whereby different stakeholders from across the business collaborate to share knowledge.
In this way, different perspectives can be challenged and alternative scenarios considered: for example, these might include the risks posed by corporate developments such as mergers and acquisitions or by the use of cloud-based or outsourced services. In addition, cross-company involvement is essential to identify key assets at risk and, most importantly, to develop and test robust crisis response plans.
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About Allianz Global Corporate & Specialty
Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. AGCS provides risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 12 dedicated lines of business.
Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film actors. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.
We constantly strive to deliver the best for our customers through our global team of around 4,400 employees from over 70 nationalities in 34 countries worldwide. As the one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial strength ratings and a global network in over 200 countries and territories. In 2018, AGCS generated a total of €8.2 billion gross premium worldwide.