Cyber insurance market 'still catching up' to evolving risks

The insurance market has been told it needs to come together to support its risk management clients around the access to – and understanding of – the cyber cover currently on offer.

Speaking at the Airmic annual conference in Manchester, Marsh’s UK cyber growth leader Brian Warszona said some risk managers were still looking to understand the product.

“We have seen businesses looking to understand the answers to key questions around cyber insurance,” he explained.

“What is covered, what is it and what benefit does it bring to my business?”

Warszona continued: “There needs to be more understanding of the risks and the solutions.

”Risk managers should do some modelling to understand their risks. When they get the results, they need to read through them carefully, not simply flick through the data.”

He added that although the insurance industry has been offering cyber products for 25 years, it still has a long way to go.

Earlier this week (20 June 2023), SecurityScorecard revealed while 74% of the top UK insurers have a B or higher risk rating, some 26% had “such poor cyber ratings” with a risk rating of C or below.

Chris Scott, insurance solutions director at SecurityScorecard, explained that “most insurers would use C as a minimum case for progressing to quote”.

However, Warszona said: “We are still developing the market, but we are making strides to make it a lot clearer as to the products and their use.” 

AI

Meanwhile, Warszona highlighted that the increasing implementation of artificial intelligence (AI) was creating new risks for the market.

He said the rapid development of technology and its use for businesses across the economy has seen the insurance sector struggling to keep up with the changes that these developments created.

This is despite the insurance sector starting to experiment with AI – for example, insurer Zurich said in March that it was experimenting with ChatGPT as it explored how it could use AI technology for tasks such as extracting data for claims and modelling.

And insurtech Artificial Labs announced in May that it was using the tool as part of a pilot to assist underwriters.

However, Warszona said: “The situation remains that at present, we do not have the data to understand the issues, which may be created, should there be a significant event.

“Cyber insurance is still catching up on the potential and the exposures that the market could offer.”

Warszona said the increasing use of technology within industrial control systems had also created a new set of risks.

“We are now seeing a need for cover for the potential of physical damage resulting from a cyber incident,” he explained.

”We cannot say we fully understand it, but we are working on the models and insurers are now working to create an understanding of the value of putting these risks on the books.”

On the development of the market, Warszona said that all areas of the insurance transactional chain, including the reinsurers, needed to play their part.

“In the UK, most insurers will complete their reinsurance renewals on 1 January,” he added.

“It is only then that insurers can assess their appetite for cyber risks.

”However, it does create a gap of several weeks during which, we as brokers are looking to encourage the underwriters to write the business.”