Cyber risks, the advent of an industry challenge
Nov 02, 2015
In today’s modern world there is an ever increasing dependency on technology, particularly computing and the internet, both at home and in business. This dependency has grown exponentially in recent years with the wide scale popularity of mobile internet devices and the growth of online banking, e-commerce and cloud computing. These mobile internet devices and online services have become so ingrained in society that the younger generation finds it hard to imagine how we operated before these technologies were available.
When these technologies were first introduced, hacking / cyber-attacks were commonly perceived as a nuisance to consumers and businesses, where hackers disrupted services or inundated us with spam emails. These hackers were widely viewed as a small community of computer experts, who were testing / showcasing their technical abilities by attacking servers and exposing security vulnerabilities.
However, with the aforementioned growth in online banking, e-commerce and cloud computing, this hacker community has been replaced with a network of sophisticated criminal gangs. These criminal gangs identified that they could exploit security vulnerabilities in order to illegally generate vast sums of money.
A business’ exposure to cyber risk could, amongst others, lead to theft of money and intellectual property, physical damage, business interruption and reputational damage.
McAfee Security estimated that in 2014 cybercrime had an annual cost to the global economy of USD 400 billion.
Across the world, legislation regarding cyber-security breaches remains scarce; however, in some US states notification of a cyber-security breach has become mandatory. The
European Commission has recently developed a cyber-security directive to protect network and information security across member states. National authorities will be required to exchange information and cooperate with the owners / operators of critical infrastructure (such as energy, transport, banking, stock exchange, healthcare) and key internet providers (e-commerce platforms, social networks) in order to assess the risks and adopt appropriate measures to maintain the security of information and the network.
Fortunately the insurance industry is aware of the risks regarding cyber-security and has developed a range of products for their clients. Since this is a relatively new line of business that is rapidly developing and is yet to reach critical mass, the degree of sophistication and scope of coverage are still being developed.
In a report published this year by the
UK Government and
Marsh, it is reported that in 2014 81% of large businesses and 60% of small businesses in the UK had suffered a cyber-security breach. These businesses placed cyber-security amongst their leading risks in terms of likelihood and severity of impact. Other studies have shown that while 50% of these businesses believe that they have cyber insurance in force, the reality is that less than 10% have cover in place.
We have a keen interest in this rapidly developing sector of insurance and are contributing to the efforts of our industry to shape this line of business both externally and internally. As specialised loss adjusters and risk surveyors,
ADVANTA is in a privileged position to develop a service to meet the requirements of these complex risks. Naturally, we are working extensively to bring these services to the market and we are optimistic about the outcome of our efforts.
For assistance, please contact:
