The burgeoning cyber insurance market is at a critical point of inflection. After 20 years of product evolution, with most mainstream carriers finally settling on a common core set of coverages, the status quo is being challenged. As our world becomes more connected the prospect of cyber attacks resulting in serious physical damage looms larger. But how should the insurance market address these new exposures?
Executive SummaryCyber affects all lines of insurance, and traditional insurers must accept that it is a fundamental part of their underlying exposure, writes CFC Underwriting Chief Innovation Officer Graeme Newman. The unique skills of cyber underwriters lie in their understanding of non-physical damage, loss of data and privacy breaches. To insure against tangible property damage, brokers should instead turn to property carriers, he advises.
The property insurance market was created as a by-product of the Industrial Revolution. Modern manufacturing and mass property ownership created a need for insurance products to protect the value stored within tangible assets such as buildings, plants and machinery—assets that were at increasing risk from physical perils such as fire, theft and flood.
The cyber insurance market was created as a byproduct of the Technological Revolution. Modern computing and the explosion of data creation and storage created a need for insurance products to protect the value stored within intangible assets such as data, intellectual property and software applications—assets that are increasingly at risk from intangible perils such as malware, hacking and corruption.