Council Foundation Logo Leaders Edge

As the cyber insurance industry tries to keep up with the growing demand for cyber policies, new potential disrupters could lead to increased competition with more efficient ways to gauge the insureds’ cyber risks. According to the 2015 Betterley Report, annual cyber policy premiums are nearly $2.75 billion with a growth rate between 25-50 percent each year. However, underwriters are constantly struggling to adequately gauge cyber risk, which creates uncertainty regarding what type and how much cyber insurance to offer.  Regardless, the demand for cyber coverage is only going to increase, which has captured the interest of startups that can better address risk metrics and forecast loss ratios more accurately. Unlike predicting earthquake and flood risks, which are based on hundreds of years of historic data, the timing, scale and nature of cyber risk is both uncertain and dynamic. One example of a new market player is Symantec, a data security, storage and systems management company which “has hired actuaries who are blending historical and real-time data” by tracking 800,000 security events every second.

The uncertainty of cyber risk is no secret among brokers. In fact, The Council’s most recent Cyber Market Watch Survey suggests that 71 percent of brokers believe there is little clarity in what policies do and do not cover and that brokers struggle to grasp the what cyber risks their clients face. This uncertainty, combined with the lack of actuarial data to support cyber policies, leaves a gap in the market waiting to be filled. By using technology as a main criterion for underwriting risk, the Silicon Valley could not only disrupt the cyber insurance market, but also increase the affordability and accessibility of cyber insurance.

Leave a Reply

You must be logged in to post a comment.