Cyber Insurance Market Overview
The global cyber insurance market size was valued at $3,416.4 million in 2016, and is forecasted to witness over 20% CAGR during the forecast period. With the increasing threat on digital capital and ongoing risk of business failure through cyber accidents, the market for claim service has been experiencing the fastest growth among all the cyber insurance services. Due to rapid rise in cyber risk from new technologies and their associated deployment, the market for risk consulting service is also expected to witness a potential growth in coming years.
AMERICAS CYBER INSURANCE MARKET, BY SERVICE, $M (2013 – 2023)
Insurance companies, while in the process to develop new products and speeding up the go-to-market strategy, know that there is moderate scope of innovation in the insurance sector. With lower premiums and greater coverage, insurance providers are differentiating their products from those of peers. However, the concept of internet of things (IoT) is revolutionizing the cyber insurance market and is directly impacting the cyber insurance market, positively. Sensors, while offering unprecedented access to granular data of any business and its operations, can be transformed into valuable insights for accessing cyber risk more accurately. IoT is further expected to fundamentally change what end customers know and how they interact with themselves and insurers.
As the global demand of cyber liability grows with the rise in cyber risk, more insurance providers have been observed receiving submissions for cyber liability business in recent years. According to the study, more than 75% of the underwrites cite that the overall price of coverage is a prime factor responsible for the sale of cyber insurance. Apart from this, the breadth of cyber cover and ease of policy applications are some other factors clients consider while making purchase decisions.
From the geographical standpoint, Americas was the largest cyber insurance market, contributing more than 90% of the revenue to the global market in 2016. This region is also expected to remain the largest market throughout the forecast period. Moreover, there has been a spike in the demand of premium-effective cyber insurance from Asia-Pacific, where countries such as China, Japan and Germany have been hit the hardest by many recent cyber-attacks.
Cyber Insurance Market Dynamics
The denial of service (DoS) attacks have been very prevalent in the recent past. The victims of such orchestrated attacks range from major financial institutions to individuals attempting to access their personal email. These attacks have caused significant damage, in terms of revenue, to businesses of all sizes across industries. For example, the distributed denial of service attack (DDoS) on October 2016 against DNS provider, Dyn impacted Twitter, Netflix, Airbnb, Spotify, The New York Times and many more websites of small and large businesses alike.
Financial motives have traditionally been behind most of the DoS attacks that businesses have faced so far. Cyber insurance providers help businesses reduce the risk of such attacks by monitoring the global threat landscape and understanding the latest trends in DoS attacks.
Further, almost all applications today tend to be built more and more often with reusable components such as past data from a variety of sources, malicious code poses a significant operational risk to data driven enterprises. Therefore, enterprises today are turning to cyber insurance to effectively secure their applications.
The added complexity of supply chain cyber risk in recent past has greatly amplified the already present numerous challenges in supply chain management. This is one of the prime factors driving the cyber insurance market across industries, and escalating the growth of the global market. When the supply chain sensitive data is breached and exposed, the impact on an organization or enterprise is far-reaching. Businesses experience financial penalties, loss of consumer confidence, legal cost, and drop in stock price.
The recent cyber extortion campaign experienced by world businesses on 12th May 2017, has been one of the most significant cyber-catastrophes till date, which clearly demonstrates the systemic nature of cyber risk prevailing around the globe. Utilizing single vulnerability to spread malware to over 300,000 computing machines in over 150 countries caused an immediate need for cyber insurance from industries where havoc was created, including sectors as diverse as healthcare and manufacturing. While many cyber policies covered the losses from WannaCry and related attacks, cyber coverage and the market cyber insurance market is growing more popular around the world, with the U.S. being the biggest market and a global driving force for the adoption of cyber insurance, so far.
One of the major challenges to the growth of the cyber insurance market exists around the pricing, and the modeling of risk aggregation of the cyber incidents that resulted in physical damage in the past. Lack of education in terms of business understanding and cyber risk creates a hindrance to the growth of the cyber insurance market as it leads to lazy decisions from the management and operations of all-sized enterprises.
Cyber Insurance Market Competitive Landscape
The cyber insurance market is moderately competitive, where some global insurance players are currently enjoying monopoly in business specific offerings. Some of the major players operating in this industry are American International Group Inc., Chubb Limited, Zurich Insurance Group AG, XL Group Ltd, Berkshire Hathaway Inc., Allianz Global Corporate & Specialty SE, and Munich Re Group.
The companies in the cyber insurance market are also trying to improve their offerings through new product launches. For instance, in March 2017, Chubb Limited launched an online platform, Chubb Ignite, for brokers, which would allow it to quote and bind SME business in lesser time. The company believes that through this launch, brokers will benefit from a client-centric approach to trading with client information at a single place, across all product ranges.