The increasing number of cyber attacks is driving the demand for cyber risk insurance across the world, according to a new report from Timetric.
The size of the cyber risk insurance market, in terms of gross written premiums, has grown from $850 million in 2012 to an estimated $2.5 billion in 2014.
It presents an opportunity for insurance firms to deliver innovative cyber insurance products. With total cyber-crime-related global losses at $445 billion, according to Timetric Insurance Analyst Jay Patel, the problem may reach a point where laws may dictate the purchase of this unique insurance product.
“With governments becoming increasingly involved in cyber threats, the prospect of compulsory cyber risk insurance could become a reality,” Patel said. “It would have a transformative impact upon the market and could create a strong source of future revenues for non-life insurers.”
An even bigger opportunity for the introduction of cyber insurance products exists in Europe. The market is much smaller than the U.S. at this time, but demand is expected to explode as the European Union’s General Data Protection Law goes into effect by 2017. The law makes data breach notification compulsory, and EU regulators will hold a powerful compliance stick in the form of penalties.
Europe’s gross written premiums were measured at $150 million in 2014. That pales in comparison to U.S. premium numbers, which reached $2 billion in 2014.
“The reason why the European market is less developed that the U.S. is because of a small number of cyber insurance products that are offered by insurers and less business awareness of the cyber risk problem,” Patel said. “However, insurers are making forays to serve the European markets.”