Cyber risks challenge insurance market: Crawford report

The increasing frequency and complexity of claims are primary challenges facing the cyber insurance market, a report released by Crawford & Co. on Wednesday finds.

Authored by Benedict Burke, London-based senior vice president at Crawford & Co., the report, “The Future of Cyber Insurance,” notes that while a survey of businesses in Ireland and the U.K. found that the companies sustained an average of 70 new malware infections a day, insurance policies that sufficiently address the full scope of cyber risks facing companies are difficult to find.

“The insurance industry is at the relative infancy stage of responding to risk managers' concerns with bespoke cyber insurance products,” the report states. “However, current limits available in the Lloyd's and company market are low, and attachment points high.”

Accordingly, many cyber losses involving digital attacks and data breach are uninsured, the report notes.

A lack of loss history also hinders insurers' ability to assess the risk and offer ample coverage, the report finds.

“Insurers currently lack the data and claims history to build an accurate picture of the exposure and in lieu of this are reluctant to offer broad coverage wording and capacity to fully indemnify against first- and third-party cyber risks,” the report states.

Moreover, the multiple interlinked elements of cyber claims add to the challenges insurers face. “One feature all cyber claims have in common is their high degree of complexity,” the report states. “It is the timely response to these complexities which can help minimize the overall impact of a network failure or data hack.”