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SOUTHAMPTON, Bermuda — Despite the difficulty of quantification, ongoing cyber breaches are fueling interest in and placement of some cyber-related risks in captive insurers.
“Everything we do now at work is on a computer that is tied to your company's network,” said John Masters, Hamilton, Bermuda-based senior underwriter with American International Group Inc. “There is more acceptance by company senior executives that the risk is there, causing more interest in acquiring cyber liability insurance.”
The cyber liability insurance market, which had about $2 billion in gross premiums in 2014, is projected to reach $7.5 billion by 2020. More than 60 insurers offer stand-alone cyber coverage, and more are entering the market, Mr. Masters said.
As cyber breaches have proliferated, interest has developed in the manufacturing industry for captive coverage of bodily injury and property damage as a result of a cyber breach.
Other industries are examining covering reputational risks, he said of the risk that the massive 2013 Target Corp. data breach put on top of company executives' radars.
Still, an Aon P.L.C. survey released in April found that only 40% of respondents bought cyber insurance.
The “intimidating task of understanding the risk” is what keeps many companies from putting cyber risks in a captive or purchasing commercial insurance, said Peter Mullen, CEO of captive and insurance management at Aon Global Risk Consulting in Pembroke, Bermuda. He said clients were buying excess coverage and reinsurance.
While just a dozen of 1,110 clients had put some type of cyber risk in their captives 18 months ago, that rose to more than two dozen as of last December, he said during the June 13-15 Bermuda Captive Conference.
“It's not a huge number, but the adoption rate is definitely growing,” Mr. Mullen said.
“Companies always have the risk. They can either be self-insured and buy excess (insurance) or not buy coverage at all,” Mr. Mullen said. “From a captive perspective, we see steady growth for captives that are writing cyber.” However, if there were “a great big claim for property damage or bodily damage, it will change how captives are used.”