Estonia Cyber (Liability) Insurance Market - Trends, Industry Competitiveness & Forecasts to 2022

A subset of liabilities insurance under property and casualty insurance, cyber risk, at present, forms a small segment of P&C insurance. Currently, it does not boast of high adoption rates as that for life and automobile insurance. However, there are several reasons to pay attention to cyber security insurance, as a standalone profitable arm of enterprise insurance:

• High Cost of Cybercrime (Directly Proportional to IoT adoption): A report in 2013 stated that the global cost of cybercrime is no less than USD 445 billion, annually. As higher number of businesses transfer core data to the cloud, and IoT adoption increases, these numbers are expected to rise, to generate an estimated USD 2 trillion or more, by 2020. Recent examples of cybercrime include hospitals held hostage for ransom, Bangladeshi funds taken from Federal Reserves, sensitive financial and contact information of private individuals put online, and much more.
  • Typical data breaches include loss of  PII (Personally Identifiable Information), PHI (Personal Health Information), Credit Card Information, and other threats, such as DDoS (Distributed Denial of Service), and Ransomware. Costs of remediating the consequences of a cyber attack have also increased, from USD 159 in 2015 to USD 170 in 2016, per record, for US-based enterprises. Forensic and other investigative costs related to detection and escalation have also increased: assessment & audit services, communication & management of resultant crisis have risen from USD 0.76 million as of 2015 to USD 0.99 million in 2016, as an average cost for US-based enterprises.
• A Steep Rise in Premiums and Adoption by Diverse Industries: The range of crimes is undefined, as this is a niche market. As per our estimate, this industry is expected to grow at rates higher than any other insurance market. Premiums have grown from USD 0.6 billion in 2010 to about USD 2 billion in 2015. Lloyd’s is one of the companies that has actively ridden the wave of cyber insurance, as the risk was seen to develop, with a 45% premium growth year-on-year, since 2012.
• Cybercrimes to Occur not only in developed nations, and Require a Common Legal Framework: Till date, crimes have focused largely on developed nations, with a high IT adoption level across all enterprises (even those that are not IT driven), owing to which, around 9 out of 10 cyber crimes were focused on US-based enterprises. This leads to an informal overreliance on US-based policies for cybercrimes. As many crimes afflict enterprises that are not based in the United States, this type of third-party liability risk appears disproportionately accumulated in the US market. However, this is changing as new guidelines and laws are introduced by other governments: The European Parliament introduced GDPR (General Data Protection Regulation) in April 2016 (to be enforced by May 2018), which is imposed on not only domestic enterprises, but all enterprises that deal with the EU citizens’ data. Penalties for not abiding include corporation fines of up to 4% of the annual global turnover. We estimate a common legal framework to emerge in the future, a strong indicator of a high growth market.
• How to Measure the Monetary Cost of Cyber Risk: One of the challenges faced by companies observing high increase in revenues from cyber crime include credible ways of estimate the cost of potential risk. In a niche market, where causes of risk exposure are not properly articulated, evidence suggests that cyber-related (or IT related) touch points exist as only one window of risk exposure when it comes to cyber crimes. In fact, cyber risk exposure lies entrenched in property, marine or other formats, equally. Hence, it is important to understand the best ways to predict, track, measure, and prevent cyber risk? Our reports can help provide accurate information regarding these aspects.