Cyber insurance comes of age

Abstract

Cyber insurance is a rare new class of insurance. Like other completely new types of insurance that have emerged over the decades, it presents unique challenges for insurers as they attempt to isolate the frequency and quantum of likely claims, since no historical loss data exists. Even the nature of the peril is not yet universally agreed. Many factors, including changing regulation, the evolution of hackers’ techniques, advances in security protocols and the potential for a cyber catastrophe event, affect the price of cyber insurance cover. The short history of the development of cyber insurance involved several false starts, but cyber insurance has now come of age. A variety of policies and associated services are available in the international market and the range of coverage continues to expand, in successful response to market demand; however, policies vary dramatically. This paper explains the challenges in pricing cyber insurance risk, the history of the development of cyber insurance, which cyber and cyber-related risks can now be insured, the current state of the cyber insurance market, and some of the differences between various policies available today.