Insurance premiums for cybersecurity could grow to $7.5 billion in the next five years, according to a new report.
The study, issued by PricewaterhouseCoopers, found that $2.5 billion was spent on cyberinsurance premiums in 2014, a year in which an average of 100,000 global cybersecurity incidents took place each day. Researchers found that the growing incidence of attacks could cause insurance premiums to surge to $5 billion in 2018, and $7.5 billion in the two years to follow.
Increasing financial losses resulting from cyberattacks on medium-to-large companies are driving the surge in premiums, the authors said. They found that companies valued at $100 million to $1 billion lost an average of $1.3 million to cyberattacks in 2014, compared to $1 million in 2013, while those valued at more than $1 billion lost an average of $5.9 million, up from $3.9 million the previous year. Companies valued at less than $100 million, meanwhile, saw a slight decrease, from an average of $650,000 in losses to an average of $410,000.
The authors also suggested that the insurance industry wasn’t keeping pace with demand in the insurance market, finding a “limited number of insurers offering such coverage” and offering coverage at levels below what their clients were seeking. The maximum coverage offered is $500 million.
Paul Delbridge, an insurance partner at PwC, suggested that insurance companies should find a way to accommodate the market quickly, saying they “are at serious risk of missing” a “rare market opportunity to secure high margins in a soft market.
“If the industry takes too long to innovate,” Delbridge continued, “there is a real risk that a disruptor will move in and corner the market with aggressive pricing and more favorable terms.” However, he added, “There is also a real possibility that overly onerous terms and conditions could invite regulatory action or litigation against insurers.”
Cybersecurity costs are becoming a subject of increased speculation in light of increasing cybercrime. Last week, a study published by the Atlantic Council and the Zurich Insurance Group found that cyberattacks could cost the world up to $90 trillion in net economic benefit by 2030 unless developers ensure that cybersecurity advances at a pace equal to interconnectedness.
