COVID-19 to accelerate cyber insurance market growth, finds report

The cyber insurance market growth is expected to increase 20-30 percent per year on average over the next decade as the COVID-19 pandemic pushes companies to speed up their digital transformation, finds a new report by S&P Global Ratings.

The report highlighted that a key avenue for growth will be small and midsize enterprises, which have a considerable untapped demand for cyber insurance coverage. Cyber insurance growth rates for SMEs in the US were more than double those for other industry segments in 2018 and 2019.

"Although the yearly economic costs of cyber crime already exceed $700 billion, insured cyber losses are still very small at below $5 billion. This indicates the untapped potential of the cyber insurance market," noted S&P Global Ratings credit analyst Manuel Adam.

Adam added that "insurers will have to offer more relevant products for the market to succeed, and carefully evaluate and monitor exposures, in particular related to potential accumulation risks, to maintain credit strength if they accept cyber insurance risks on a larger scale."

Analysts warn that the accumulation of claims within a cyber insurance portfolio can expose insurers to high financial losses.

The report suggests that as the market gains critical mass, providers should continue to build out their platforms and product offerings and focus on robust underwriting skills.