Insurers must ‘increase their knowledge and expertise’ around cyber risks

Global multiline insurers (GMIs) must “increase their knowledge and expertise” around cyber risks to help avoid “claims that can no longer be insurable” and “elevated” premium prices for cyber cover, said Marc-Philippe Juilliard, director of insurance ratings at S&P Global Ratings.

Speaking at a webinar on 21 July 2021, titled ‘Covid-19 impact on global multiline insurers’, Juilliard emphasised that although “cyber insurance is still viewed as an area of growth”, insurers need to stay on top of evolving cyber crime trends if coverage and costs for this risk are going to be effective.

He said: “Cyber insurance is still viewed as an area of growth for the multiline insurers. However, recently deteriorated underwriting performance is pushing them to revise their ambitions and adjust underwriting policies to limit their exposure and to improve pricing conditions.

“It is very important that insurers increase their knowledge and expertise in this area and the reason is because cyber crime is becoming more and more frequent and sophisticated and this is leading to potential claims that can no longer be insurable in an extreme scenario.

“Alternatively, this could also lead to a situation where pricing will become so elevated that only very few policyholders could afford buying this kind of protection.”

These considerations present “some significant challenges” for the market to overcome, despite there still being “room for growth in this business segment”, Juilliard continued.

He added that “prevention” is a further area where insurers “can bring value”, however.

“Prevention is also a very key area where insurers, and particularly the large ones, can bring value to help reduce both the frequency and the severity [of claims],” he said.