Cyber Insurance Market Definition
The cyber insurance market consists of sales of cyber insurance products and related services by entities (organizations, sole traders and partnerships) that are involved in underwriting (assuming the risk and assigning premiums) annuities and cyber insurance policies.
A cyber insurance policy, also referred to as cyber risk insurance or cyber liability insurance coverage, is an insurance product designed to help businesses mitigate risk exposure by offsetting costs involved with recovery after a cyber-related security breach or similar event such as malware, ransomware, and distributed denial-of-service (DDoS) attacks.
Cyber insurance providers invest premiums to build up a portfolio of financial assets to be used against future claims. Direct insurance providers are entities that are engaged in primary underwriting and assuming the risk of annuities and insurance policies.
Cyber Insurance Market Size
The global cyber insurance market reached a value of nearly $6,785.0 million in 2018, having increased at a compound annual growth rate (CAGR) of 37.2% since 2014.
Growth in the historic period resulted from the growth in the number of cyber-attacks and increased spending on information security by organizations. Factors that negatively affected growth in the historic period were a lack of awareness of insurance coverage among the general public, low penetration of cyber insurance, and a lack of awareness of potential losses by organizations.
Going forward, stringent regulatory environments such as full compliance with GDPR, increased evaluation of cyber threats during mergers and acquisitions, increasing awareness of cyber threats, and growing adoption of internet-based business models will drive the growth. Factors that could hinder the growth of the cyber insurance market in the future include a lack of actuarial data and proven cyber exposure models, pricing uncertainty around cyber insurance policies, and emerging new types of cyber exposures and risks.
Cyber Insurance Market Drivers
The key drivers of the cyber insurance market include:
Growth In Cyber Attacks — During the historic period, the increased number of cyber-attacks targeting financial data of corporates and individuals drove the cyber insurance market. According to Symantec’s Internet Security Threat Report 2019, the number of web attacks in 2018 increased by 56%. Among the cyber-attacks, enterprise ransomware infections, malicious software designed to deny access to the system until a ransom is paid, increased by 12% with the number of Dharma/Crysis infection attempts almost tripling from an average of 1473 attacks per month in 2017 to 4900 attacks per month in 2018. During the same period, the share of Microsoft Office files attachments in malicious emails increased from 5% to 48%, and supply chain attacks mainly targeting e-commerce operated businesses registered an increase of 78% . The increased number of cyber-attacks pushed enterprises to initiate data restoring practices including cyber insurance driving the market.
Cyber Insurance Market Restraints
The key restraints on the cyber insurance market include:
Lack Of Awareness Of Potential Losses — The lack in estimating potential losses in an accident of a cyber-attack restrained the growth of the cyber insurance market. The estimation of potential losses acts as a prerequisite to a decision to purchase an insurance policy. During 2015-2016, the share of companies in the UK that evaluated potential losses decreased from 39.9% to 35.4%. In 2016, in continental Europe, about 50% of companies identified potential loss scenarios, however, only 40% evaluated potential financial risks and strategies to fund them . The lack of understanding and financial estimation of potential cyber risks limited the growth of the cyber insurance market in the historic period.
Cyber Insurance Market Trends
Major trends influencing the cyber insurance market include:
Increasing Use Of Big Data By Global Insurers
Cyber insurance providers are increasingly using big data analytics solutions for faster claim assessment and risk identification. Big data is being used in claims management, pricing, underwriting and risk selection processes among others. This growth in the use of big data is mainly driven by increasing points of contact including social media, which provides a bulk of data that can be transformed into insights by insurers to efficiently execute the settlement process. Big data consists of high-volume, high-variety and high-velocity information, and this benefits insurers in multiple ways such as faster identification and reporting of events, automatic claim assessment and calculation of loss reserves. According to a survey by Willis Towers Watson, a UK-based risk management, insurance brokerage and advisory company, in 2017, 46% of insurance providers were using big data analytics solutions to analyze unstructured internal claim information, and this is expected to increase to 92% by 2020.
Shift From Endorsement To Standalone Policies
Cyber insurance companies are seeing a shift of policy buyers from endorsement to standalone policies. Endorsement policies are attached to property and casualty policies, whereas standalone cyber insurance policies refer to insurance policies covering threats from cybersecurity breach events. Standalone cyber insurance policies typically offer liability coverage for losses related to data breaches. Businesses filing a cyber-incident related insurance claim under standalone policies are able to receive monetary compensation of their legal and investigative fees as well as the cost the loss incurred . According to PartnerRe’s survey among cyber insurance policy holders, the availability of the dedicated limits for cyberattacks was the major reason for the shift from endorsement to standalone policies. Other reasons for the shift included demand for expanded Business Interruption coverage, expanded coverage of other areas by endorsement policies, and expanded monetary limit in case of the data breach .
Opportunities And Recommendations In The Cyber Insurance Market
Opportunities – The cyber insurance market size will gain the most in the USA at $4,211.1 million. Market-trend-based strategies for the cyber insurance market include integrating advanced technologies such as AI-enabled chatbots to automate business processes, using big data analytics solutions to improve business process efficiencies, and expanding the offerings of standalone insurance policies to cater to the increasing demand. Player-adopted strategies in the cyber insurance market include expanding through new product development, and expanding through strategic acquisitions.
Recommendations – To take advantage of these opportunities, The Business Research Company recommends the cyber insurance companies to offer standalone cyber insurance policies, use automation and big data technologies, target countries vulnerable to cyberattacks, and focus on personal cyber insurance.
Cyber Insurance Market Segmentation
The cyber insurance market is segmented by type of distribution, by type of insurance, by size of business, by type of claim, by end-use industry and by geography.
By Type Of Distribution -
The cyber insurance market can be segmented by type of distribution
- a) Brokers
- b) Tied Agents And Branches
- c) Direct and other
- d) Bancassurance
The brokers market was the largest segment of the cyber insurance market, accounting for 47.8% of the total in 2018. It was followed by tied agents and branches, direct and other, and bancassurance. Going forward, direct and other segment is expected to be the fastest growing segment in the cyber insurance market.
By Type Of Insurance-
The cyber insurance market can be segmented by type of insurance
- a) Standalone
- b) Package
- c) Personal
The standalone market was the largest segment of the cyber insurance market, accounting for 53.1% of the total in 2018. It was followed by package, and personal.
By Size Of Business-
The cyber insurance market can be segmented by size of business
The mid-sized business market was the largest segment of the cyber insurance market, accounting for 65.0% of the total in 2018. It was followed by large, and small. Going forward, small sized business is expected to be the fastest growing segment in the cyber insurance market.
By Type Of Claim-
The cyber insurance market can be segmented by type of claim
- a) Ransomware
- b) Hacker
- c) Business Email Compromise
- d) Malware/Virus
- e) Phishing
- f) Others
- g) Third Party
- h) Rogue Employee
- i) Legal Action
- j) Paper Records
- k) Programming Error
- l) Staff Mistake
- m) Lost/Stolen Laptop/Device
The ransomware market was the largest segment of the cyber insurance market, accounting for 32.7% of the total in 2018. It was followed by hacker, business email compromise, malware/virus, phishing, and others. Going forward, business email compromise segment is expected to be the fastest growing segment in the cyber insurance market.
By End-Use -
The cyber insurance market can be segmented by end-use
- a) Professional Services
- b) Media
- c) Healthcare
- d) Others
- e) Government Bodies (Public)
- f) Financial Services
- g) Retail And Wholesale
- h) Education
- i) Manufacturing
- j) IT Services
The professional services market was the largest segment of the cyber insurance market, accounting for 17.2% of the total in 2018. It was followed by media, healthcare, others, government bodies (public), financial services, and others. Going forward, education segment is expected to be the fastest growing segment in the cyber insurance market.
By Geography –
The cyber insurance market is segmented into
- o North America
- o Western Europe
- UK
- Germany
- France
- Spain
- Italy
- Switzerland
- Netherlands
- Belgium
- o Asia Pacific
- China
- Japan
- India
- Australia
- South Korea
- Indonesia
- o Eastern Europe
- o South America
- o Middle East
- o Africa
North America was the largest region in the global cyber insurance market, accounting for 55.8% of the total in 2018. It was followed by Asia Pacific, Western Europe, and then the other regions. Going forward, the fastest-growing regions in the cyber insurance market will be South America and Eastern Europe.
Cyber Insurance Competitive Landscape
Major Competitors are:
- • Chubb Limited
- • AXA Group
- • American International Group, Inc.
- • Beazley Insurance Co, Inc.
- • The Travelers Companies, Inc.
Other Competitors Include:
- • AXIS Capital Holdings Limited
- • BCS Financial Corporation
- • Liberty Mutual Group
- • Zurich Insurance Group Ltd.
- • AIG Insurance Co China Ltd
- • Bajaj Allianz General Insurance
- • HDFC ERGO General Insurance Company Limited
- • Mitsui Sumitomo Insurance Group Holdings, Inc
- • AIU Insurance Company
- • Samsung Fire & Marine Insurance
- • Emergence Insurance Pty Ltd
- • Brooklyn Underwriting Pty Ltd
- • Allianz China General Insurance Company Ltd
- • Ping An Insurance
- • ICICI Lombard General Insurance Company Limited
- • SBI General Insurance
- • Tokio Marine & Nichido Fire Insurance Co., Ltd
- • Sompo Japan Nipponkoa Insurance
- • Lotte Insurance Co., Ltd
- • CNA Financial Corp
- • BCS Financial Corp
- • QBE Services
- • Aon plc
- • Munich Re
- • Lloyd`s of London
- • Aviva plc
- • Pen Underwriting.
- • AlfaStrakhova
- • Sberbank Insurance
- • IPJSC Ingosstrakh
- • Colonnade Insurance S.A.
- • Seguros SURA
- • Generali Global Corporate & Commercial Brazil
- • Abu Dhabi National Insurance Company
- • Ayalon Insurance Company Ltd
- • Santam