CYBER INSIGHTS
"... THE NUMBER OF CLIENTS SEEKING CYBER THREAT MITIGATION AND CYBER INSURANCE HAS DOUBLED BETWEEN 2016 AND 2020 ."
coming out of the pandemic and the way businesses are beginning to look at cyber threats . With that being said , it doesn ’ t pay to look on the bright side and ignore negative aspects of the situation . Attacks are rapidly becoming more sophisticated , companies are becoming more inclined to pay for their data in the events of ransomware attacks , and the current geopolitical climate is rapidly becoming very beneficial to cyber criminals .
Losses are building and building for carriers as a result of increasing numbers of attacks on their cyber infrastructure . Those losses have led them to be more wary about the situations they will cover , what new clients they may take on , and to take a more conservative stance in general in relation to cyber security . Many cyber insurers rely heavily on reinsurers , leading to roughly half of their own cyber premiums heading to the reinsurance market , with 60 % landing in the hands of just four reinsurers .
Why are the recent upticks in cyber threats seemingly catching these companies off guard ? They cite a lack of cyber-loss data as a major cause due to a lack of historical precedent . The insurance industry is the foremost authority in actuarial sciences and should have been building large repositories of data regarding claims , policies , and threats over the last two decades . As a new area of risk , cyber threats represent a need for understanding that could have been resolved through the study of statistics and probability , both of which the industry should have known it would need as an informed basis for underwriting . Unfortunately , instead of doing the work to compile those issues , many companies chose to , instead , aim for the highest market share and grab their piece of the metaphorical pie before doing the back-end work to ensure everything was being done properly .
THE OTHER SIDE OF THE COIN
Compounding that risk from the insurance industry itself is the issue of companies who need to be insured . Often , they do not have a firm understanding of their risks . Many companies utilize simple formulas to determine how much risk they may face , such as multiplying the number of records and data points they have by a single figure to estimate their coverage needs .
The reality is that the only way for companies to accurately determine their potential losses from cyberattacks is through a thorough assessment . That cyber security assessment would include an analysis of the operations , the technical environment , the financial data , and the compliance requirements of the company . That process is relatively straightforward for small and mid-sized companies , but it becomes both more challenging and dramatically more complicated for larger companies with $ 1 billion in revenue or more .
Ultimately , most companies should turn to professionals , either within the insurance companies they are working with or through cyber industry
professionals who can help determine their risks and establish a strategy moving forward that is in alignment with best practices and standards . The risks of allowing cyber threats to loom without addressing them is so high from a monetary and regulatory standpoint that it is simply unacceptable to let them stand without doing anything . +
BY : GWENYTH P . LUU , CLCS DIRECTOR - COMMERCIAL LINES JGS INSURANCE , A BALDWIN RISK PARTNER
Gwenyth P . Luu helps organizations improve their bottom line and lower their total cost of risk by implementing the JGS Proactive Service Platform . The JGS Proactive Service Platform is an inclusive strategy that focuses on primary cost drivers of a risk management program . Gwenyth helps businesses understand all of their potential and actual costs and liabilities , execute an actionable strategy , and deliver superior client service and support . The JGS Proactive Service Platform is driven by continuous strategy and service delivered on a daily basis throughout the year . The service platform includes risk control strategies , claims advocacy and management , contract reviews and insurance program design reviews .
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