Cyber risk ranked as the top concern for property-casualty insurers in the recent “Insurance Banana Skins” survey conducted by the Centre for the Study of Financial Innovation, with respondents in the United States and United Kingdom reporting worries about the vulnerability of cloud data.
The survey, a collaboration for the Centre with PricewaterhouseCoopers, focused on the risks faced directly by insurers as businesses, rather than risk to insure. In its first appearance in the annual survey, cyber risk quickly shot to fourth place on the list of concerns.
“As more and more business moves to online and mobile channels, insurers’ vulnerabilities to hacking, fraud and data compromise continue to mount,” noted the Centre, a nonprofit think tank, in the report. “The risk is heightened by the volume of medical, financial and other sensitive policyholder information held by insurers, which if compromised would lead to a loss of trust that would be extremely difficult to restore. It’s vital that boards take the lead in evaluating and tackling cyber risk within their data and systems infrastructure, rather than seeing this as solely a matter for IT. As the threats increase, we’re likely to see more specialists in surveillance, encryption and biometric verification coming into the industry. At the same time, it’s important to look at how cyber security can be strengthened without undermining the digitally-enabled ease and accessibility customers now expect.”
Cyber risk also featured prominently on the list of top concerns for reinsurers and life insurers. External risks that all respondents worried about include over-regulation, poor investment environment, the economy, low interest rates, and market conditions. The Centre called “the lack of a robust and well-defined market for cyber risk is another top concern” worrisome for the reinsurance industry.
Geographically, cyber risk took the top spot for North American and Bermuda-based insurers, according to the results. For Europe, the risk fell lower, to fifth place, and to second place for the Far East. Cyber didn’t register at all for Latin American respondents.
The director of risk management at a non-life insurance company in Canada said in the study, “Insurers are prime targets to be victimized given the richness of data – credit card information, medical information, and other underwriting information. It’s not a matter of if but when it will happen.”
The Centre suggested that regulatory requirements to maintain more and more information about clients should heighten the problem. Respondents to the survey also fretted about the level of risk the insurance industry has taken on with cyber.
“Cyber insurance is such an unknown and many insurers may be opening themselves up to potentially horrific losses,” said a consultant in New Zealand.
While many respondents sounded the alarm for all companies that hold data, others were less convinced cyber risk should be considered so dangerous. A respondent from Switzerland noted, “The risk is probably smaller than assumed, because cyber risk insurers bloat it through the media.”
Erin is the managing editor of Advisen’s Front Page News. She has been covering property-casualty insurance since 2000. Previously, Erin served as editor-in-chief of The Standard, New England’s Insurance Weekly. Erin is based in Boston, Mass. Contact Erin at [email protected].
