Willis Re: silent cyber concerns drop significantly among insurers

Insurance sector concerns about silent cyber have declined considerably, according to an annual global survey by Willis Re.

The reinsurance broker’s 2019 Silent Cyber Risk Outlook asked more than 600 industry professionals about their perceptions of cyber exposure in the next 12 months. They were asked whether this exposure would increase the likelihood of a covered claim under insurance policies that were not specifically designed to cover cyber risk.

Respondents from property classes said they were significantly less concerned about this potential issue than in 2018. The percentage that said they expected to see more than one new cyber claim for every 100 non-cyber claims had dropped by 26 percent.

In the 2019 survey, ‘other liability’ as a class is now broadly perceived as more vulnerable to cyber risk than property. However, Willis Re found that the expectation of new claims in this class had also declined. But, unlike property, it remained higher than in 2017, when the survey was first conducted. The broker said this may have been caused by highly publicised data-breach losses throughout the period, which may be perceived to lead to third-party claims.

Commercial account size plays a noticeable role in expectation with respondents “more likely” to expect more cyber-related claims when accounts are large, and to expect a decline when they are small.

Cyber-related claims expectations in personal lines were lower than all commercial lines apart from workers compensation. While the survey did not cover personal lines last year, the broker said there has been an uptick in claims expectations since 2017, which might reflect the increasing levels of technology installed in homes and vehicles.

Results across the 23 different industry groups in the survey also showed a reduction in concern from 2018. For example, last year more than half of property respondents thought the cyber risk factor was more than 1:10. But in 2019, none of them exceeded that threshold.

But Willis Re said that “on a relative basis, however, there has been little change”. Results showed that IT, utilities and telecoms groups were still perceived as the most vulnerable within the property class and other liability and the same was found for financial services in D&O and E&O.

Highlighting one survey result that bucked the trend of declining concern Willis Re said: “Interestingly, the one exception to the reduction in silent cyber claims expectations is at the most extreme end of the expectation spectrum where the number of respondents who expect one new cyber claim for every new non-cyber claim increased in every line between 2018 and 2019. Although the numbers are small, the most sizable rise was in property, where the percentage of respondents with this claims expectation increased from 1 percent to 1.9 percent.”

Mark Synnott, Global Cyber Practice leader at Willis Re, said: “Multiple factors may be at play in these findings. While it is likely that publicity surrounding cyber loss events has had a good deal of impact on the findings, I expect that insurers’ efforts to manage their non-affirmative cyber exposures, particularly in property lines, are responsible for some of the increased comfort they feel.
"In the face of regulatory and boardroom pressure, many insurers have taken steps to mitigate their silent-cyber exposure. A number of tools now exist for insurers to measure and quantify this changing risk, such as Willis Re’s PRISM-Re cyber model.”

Peter Foster, chairman of Global FINEX Cyber and Cyber Risk Solutions at Willis Towers Watson, said: “The cyber market is evolving with the peril. These findings show that, even as demand for cyber coverage continues to increase, especially in territories like the US and the UK, insurers and others in our industry are making progress in gaining control over silent-cyber exposures. It will be interesting to see if 2018 marked the high-point of concern, or if other factors such as future high-profile loss events again change the direction of silent-cyber claims expectations in 2020.”

Industry groups surveyed include construction, engineering, real estate, transportation, shipping, hospitals, medical facilities, life sciences, public sector, universities, educational institutions, IT, utilities, telecom, industrial, manufacturing, natural resources, energy, financial services, retail, hospitality, commercial and professional services.

The complete report is available for download here.

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