As of: 09/08/2021 8:22 am
As the number of cyber attacks increases, so does the damage. Therefore, the need for insurance for such cases is now growing. The world’s largest reinsurer Munich Re expects this market to grow to 20 billion dollars by 2025.
In the face of increasing damage from cyber attacks, insurance companies have discovered a new, rapidly growing business area: cyber insurance. Reinsurers such as the world’s number one in the industry, Munich Re, formerly known as Munich Re, also benefit from this.
In fact, cyber attacks have increased dramatically due to the corona-related digitization surge – and they are becoming more and more sophisticated. In particular, the damage caused by so-called ransomware attacks is increasing sharply. Munich Re explains that this trend is likely to continue. Encryption Trojans, i.e. malware, are played on users’ computers in order to block access to the files. The user then receives a message with a ransom note. Only when this has been paid does the user usually receive an unlock code in order to be able to access his computer again.
More and more so-called “ransomware” attacks
According to an analysis by the rating agency AM Best, which specializes in the insurance market, ransomware attacks accounted for three quarters of all cyber damage in the USA last year. In July, such an attack on the American IT service provider Kaseya showed the extent of such attacks. Because the IT systems of many companies were encrypted like a snowball, the attack had effects as far as Sweden. There, the supermarket chain Coop was unable to open hundreds of stores for several days due to malfunctioning checkout systems. A total of up to 1,500 companies around the world were affected. In Germany alone, at least three service providers and subsequently hundreds of companies were affected.
Because the increasing number of such attacks is seriously affecting the economy, the coverage of the resulting damage has developed into a high-growth segment of the insurance industry, says Munich Re board member Stefan Golling. But the possibilities of the industry are limited. There are areas, for example in the case of systemic risks such as terrorist or politically motivated attacks through to cyber war, that can only be dealt with jointly by the state and insurers.
Premium volume rises to $ 20 billion
In view of the increasing damage, the prices for cyber insurance have also risen significantly. The increase compensates for the high losses, according to the reinsurer. Nevertheless, the demand for cyber insurance continues to grow.
According to a survey by Munich Re, 20 percent of company bosses are concerned about the increasing number of cyberattacks and feel that their company is not adequately protected. The insurers therefore assume that more and more companies want to protect themselves against the consequences of such attacks.
Munich Re expects the premium volume from this segment to rise to 20.2 billion dollars in four years, i.e. by 2025. This means that cyberattack insurance is currently the most important growth market in the industry. According to its own information, Munich Re has had a global market share of ten percent in terms of revenue in this segment. Because of the increasing competition, this share will decrease in the future, but the Munich-based company still wants to advance its range of cyber insurance.
The trend towards rising prices continues
According to experts, the trend towards higher prices for reinsurance will continue in the coming year. In 2022, prices are expected to increase in the low to mid-single-digit percentage range, said insurance analyst Helena Kingsley-Tomkin of the rating agency Moody’s. In addition, the developments in the entire industry are more positive. Moody’s raised the rating outlook for global reinsurers to “stable” from “negative”.
The industry had suffered from falling prices for years because of the increased competition from hedge funds and other financially strong investors who, in times of low interest rates, were discovering the insurance business in search of returns. But for a few years now, prices have been rising again. Natural disasters and other major losses have also hit the competition hard.