The insurance and reinsurance industry must change its approach to cyber risks
Although the perception of increased systemic risk in cyber insurance and reinsurance is sustainable, rates still remain lower compared to natural catastrophe risks.
Howden Re’s report, Reimagining Cyber Risk: Targeting Threats and Seizing Opportunities, reportedly uses simulated loss data from cyber insurers, providing a “first-of-its-kind” comparison.
According to a new report by Howden Re, cyber risks continue to top the ranking of risk managers.
“Investment in dedicated cyber expertise and the use of advanced risk models are key to effectively addressing complex cyber threats,” said Luke Ford-Kelsey, global head of cyber at Howden Re. “This approach will not only turn vulnerabilities into competitive advantages, but also allow companies to actively develop.”
According to data from Howden Re, title insurers assume a disproportionately greater amount of natural disaster risk compared to cyber, even though natural disasters historically cause greater losses, both economically and in insurance terms.
“In contrast, small insurers are more exposed to the impact of cyber losses in percentage terms,” the analysts said.
David Flandreau, head of industry analysis and strategic advisory at Howden Re, noted that the evolving cyber market requires a thorough review of how cyber risks are covered. “Insurers need to ensure they move from viewing cyber threats as potential losses to providing customers with a competitive advantage that can be gained through more detailed risk analysis.”
Advocating for a move to a more balanced and informed underwriting strategy, Howden analysts urge greater exploration of the potential of cyber risk insurance. “As digitization progresses, this shift could transform the industry’s role in shaping the future cyber resilience and security of companies.”