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From Russia with ransomware – a cyber underwriting report from AdvantageGo
A cyber snowball threatens to roll over western firms and their underwriters, AdvantageGo analysis warns, putting steadily more pressure on decision-making and data for cyber insurers.
The malicious risk environment for cyber shows a dangerous cocktail of ingredients that will almost inevitably put increasing pressure on cyber insurance underwriters. That’s the message from a new report from AdvantageGo to mark the launch of a cyber-specific iteration of the technology company’s Underwriting workbench.
Firstly, the volume or frequency of attacks is intensifying. The report notes the example of the Olympic Games taking place in Paris this summer. The organisers know they will be hit, just as the South Korean Winter Olympics were struck in 2018. The cybersecurity team at the last Summer Games, in Tokyo in 2021, reported that it faced 450 million attempted “security events.” Paris has said it expects to face eight to 12 times that number.
Secondly, severity is being acknowledged as a serious threat, whether in a $2.5 billion single event direct cost estimate put forward by the IMF, or systemic, indirect, sideways exposures that have been historically under reported and are much harder to quantify. AdvantageGo’s report highlights Russian attacks on water companies and power grids as one avenue of cyber-attack already taking place, with potentially wide-ranging but hard-to-map effects.
Thirdly, this mixture makes for an attritional loss environment. Nickle-and-diming is one thing; multibillion dollar catastrophe events are another; adding the two together and the cocktail becomes even more volatile for underwriters of what remains a nascent market with a dearth of data.
As the report notes, a recent study by Stocklytics.com has warned the estimated cost of cybercrime has snowballed, with 2024 set to see the figure reach $9.2 trillion, a leap of one trillion in the space of 12 months. And the growth trajectory is equally frightening—this figure is expected to jump by a further 70% and hit $13.8 trillion by 2028.
It’s hardly surprising that demand for cyber insurance is forecast to continue to grow exponentially. For (re)insurers, this has meant that the global cyber insurance market has tripled in volume in the last five years, expanding to gross direct premiums of around $13 billion in 2022, according to the Swiss Re Institute (SRI), with premiums expected to grow to $23 billion by 2025.
Within this worrying context, AdvantageGo has prioritised cyber by putting together a tailored edition of its Underwriting Workbench, designed specifically for cyber underwriters, and also leveraging some of the company’s Ecosystem partnerships to provide cyber-specific data inputs.
All of this is geared towards enriching the intelligence picture for cyber underwriters, to bring about better decision-making, from risk selection and triage, to risk rating and benchmarking pricing, through to portfolio-wide diversification and exposure management.
Click the link to read the report in full – AdvantageGo Cyber Report 2024