Despite cyber attack or data breach being the top business risk, according to Aon's 2023 Global Risk Management Survey, the cyber insurance market still remains unstable.
According to the survey, factors that have contributed to this rise in rank include growing awareness of cyber threats, high-profile data breaches and ransomware attacks and greater underwriting scrutiny by the insurance market.
“The insurance market is interesting because of the behaviours and attitudes within the insurance market and the companies with capital at risk associated with this particular topic,” Aon head of cyber solutions, APAC Adam Peckman said. For instance, he said, rates looked asynchronous in the marketplace due to a lag effect.
Spikes in the frequency of ransomware attacks and fluctuations in premiums led to a hardened market. Although capital is available and the underwriting discipline has not changed, the market still has not stabilized as insurers continue to look at capacity, wording of the policy and willingness to take on risk.
“In terms of a worsening outlook, we will have to wait to see whether insurers improving diligence and managing tail risk on the front and back ends will either correct or continue to stabilize the market,” he said.
Readying for a cyber attack
With such high risk of a cyber attack, companies in APAC have been tightening data privacy and security regulations, according to Mr. Peckman.
“Companies have been making decisions about use of capital to mitigate and potentially transfer cyber risk,” he said.
Cyber also tends to be an interconnected risk, he said, and it has the potential to be an accelerant in velocity and severity. “A company’s portfolio, loss of intellectual property and potential impact on artificial intelligence are some things that come to mind when it comes to data privacy requirements,” he said.
Companies are also beginning to understand what a digitally-enabled attack means for supply-chain operations, he said.