Cyber insurance is a risk management and processing tool that limits the economic impact of cyber incidents, thus maintaining financial stability in the event of a cyber attack.
Cyber security insurance is an emerging tool that can protect organisations from losses related to cyber attacks. Now regarded as one of the most efficient risk management and transfer approaches, cyber security insurance was developed because businesses required an additional layer of protection for their cyber security management processes to combat cyber security incidents and attacks. This approach expands beyond mere risk mitigation measures.
The COVID-19 pandemic forced modern society to become increasingly dependent on IT infrastructure and services. Specifically, the transition from traditional to remote working led to a rise in cyber attacks, a direct consequence of the larger attack surface available to hackers. Several organisations relied on protocols, such as the Microsoft Remote Desktop Protocol (RDP), which have since become a convenient attack point for cybercriminals. As a result, businesses need to improve the protection of IT systems and corporate infrastructure.
In addition, geopolitical tensions are compelling organisations to make substantial investments in cyber security to develop administrative and technical precautions and avert unintentional or malicious cyber security breaches. Cyber security insurance is increasingly becoming a necessity for large corporations, as they face various cyber threats such as supply-chain attacks, ransomware, business email compromise (BEC),and fund transfer fraud.These threats, as reported by the 2021 Enisa Threat Landscape and the 2021 Hiscox Cyber Readiness Report, have prompted organisations to seek additional protection through cyber security insurance.
The ISO/IEC 27102:2019 standard offers guidance on cyber insurance in relation to information security management. It recognises cyber insurance as an alternative risk treatment option to mitigate the effects of cyber incidents within an organisation’s information security risk management framework.
As per the ISO framework, cyber insurance can provide coverage for various cyber incidents that could cause considerable financial losses due to business disruptions, network damage, and any event that might affect information security or business operations. Cyber insurance policies can cover a range of computer incidents, such as system failures, data breaches, loss of data integrity or availability, cyber attacks,and unintentional human errors.
Certain cyber insurance solutions can provide coverage for the expenses involved in data recovery, business operation resumption and continuity, legal fees, and costs incurred in notifying customers whose data has been breached. As a result, cyber insurance has the potential to provide coverage to companies at the operational, strategic, organisational, and business planning and reporting level.
Cloudian’s Ransomware Victims Report states that ransomware is a leading cyber threat motivating organisations to adopt insurance as a risk mitigation strategy. Suffice it to say that organisations possessing an active insurance policy and falling victim to ransomware received approximately 59% of the ransom paid and 58% of other losses incurred as a result of the attack.
The current trends of outsourcing and cloud computing further increase the relevance and use of cyber insurance. When IT is not managed in house, it is difficult to control risks through simple technical or organisational measures. To mitigate errors and omissions, an optimal approach would be to mandate IT service providers to obtain IT insurance. However, many of them choose to limit their liability through service level agreements.
Having insurance coverage in case of an IT failure or damage is critical for most companies that rely on digital systems to manage their operations. This protects them against unforeseen events and ensures that they do not encounter any difficulties.
As per the recent report by Research & Markets, the Cyber Insurance Market had a global value of $7,209.87 million in 2022. The report forecasts that the market will reach $32.6 billion by 2028, with a projected growth rate of 18.8% CAGR during the forecast period.
Cyber insurance offers the advantage of providing greater peace of mind and reducing worries about external factors that may cause harm. This, in turn, allows businesses to invest and work in the technology and digital fields with more confidence. Cyber insurance also serves to protect companies from damage to technology, including hardware and software.