Enhancing the Role of Insurance in Cyber Risk Management

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The digital transformation of economic activities is creating significant opportunities for innovation, convenience and efficiency. However, recent major incidents have highlighted the digital security and privacy protection risks that come with an increased reliance on digital technologies. While not a substitute for investing in cyber security and risk management, insurance coverage for cyber risk can make a significant contribution to the management of cyber risk by promoting awareness about exposure to cyber losses, sharing expertise on risk management, encouraging investment in risk reduction and facilitating the response to cyber incidents. This report provides an overview of the financial impact of cyber incidents, the coverage of cyber risk available in the insurance market, the challenges to market development and initiatives to address those challenges. It includes a number of policy recommendations which support the development of the cyber insurance market and contribute to improving the management of cyber risk.



Addressing challenges to cyber insurability

This chapter examines ways to address the challenges that impede the development of the cyber insurance market. The development of probabilistic models for cyber risk could improve underwriting and reduce uncertainty although this will require improved data on past incidents and their impact as well as on the relative effectiveness of security policies and practices. There are several potential sources of data that could support probabilistic modelling and a few initiatives aimed at sharing this data within the insurance sector and between the government and the private sector. However, a lack of harmonisation limits the contribution of these efforts. The insurance sector and governments in several countries are also examining ways to improve understanding of the insurance coverage available for cyber risk and at least one country has implemented a regulatory intervention to encourage greater transparency.


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