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.



Cyber insurance market challenges

This chapter provides an overview of the main challenges to the development of the cyber insurance market in terms of both insurers' willingness to provide coverage and the demand from companies to acquire insurance coverage. The lack of historical experience and evolving nature of cyber risk create significant challenges for quantifying cyber risk. These challenges, along with concerns about the potential for accumulation risk, lead to higher prices and limited coverage levels. At the same time, the complexity of standalone cyber insurance policies, as well as the potential for coverage of cyber risk in traditional policies, leads to significant misunderstanding about the insurance coverage available for cyber risk. There are also concerns about whether cyber insurance policies are responding to the most pressing needs of policyholders.


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