One of the market’s leading cyber experts has told Emerging Risks the Insurance Linked Security (ILS) market may hold the key to the provision of sizable levels of cyber cover for large corporations.
Catherine Mulligan, Head of Cyber for Reinsurance Solutions, Aon was speaking in the run up to the CYBERUK, the annual conference staged by the National Cyber Security Centre (NCSC), a part of GCHQ.
The event which will involve cyber security experts from across the world comes in the wake of the NCSC’s annual report which found UK authorities had thwarted more cyber-attacks in 2020 than in the previous three years combined.
The NCSC’s Active Cyber Defence system removed more than 700,000 online scams totalling 1.4 million URLs. It received nearly 4 million reports of suspect emails from members of the public in 2020. Last year more than 11,000 UK-government-themed phishing campaigns were taken down, more than double the 2019 figure.
The report and event come as the US was left reeling by the cyber-attack on the Colonial Pipeline which shut down the country’s biggest pipeline for three days.
The pipeline carries gasoline and other fuel between Texas and North-eastern states, delivering roughly 45 per cent of the fuel used on the East Coast.
The rising tide of the cyber threat is increasing demand for insurance coverage but Mulligan said while the market is responding there have been some markets that have walked away from the class.
It is creating a void that alternative capital may be key to filling.
“Interest in cyber insurance remains high, particularly in the SME space,” she said. “In addition to contract requirements, the shift to remote work at the start of the pandemic highlighted the potential vulnerabilities in cybersecurity. This heightened awareness has created new buyers as well as calls for increased limits.”
Mulligan added the growth in the market would continue, the only question being just how quickly reinsurers and insurers will be willing to grow the capacity they will dedicate to cyber risks.
“In addition to original insureds seeking new or increased cover, insurers are looking to reinsurance for additional support,” she explained. “Affirmative cyber portfolios have grown both via new business and rate increases. Also, Lloyd’s mandates to attach LMA cyber exclusions to property treaties (and soon casualty), have prompted deeper assessment of total cyber exposure across portfolios.”
Mulligan said she believed there was a growing role for the ILS markets as major firms, such as energy corporations and global organisations seek ever large amounts of cover.
“The traditional reinsurance space has invested in cyber expertise, tools, models, which has supported deployment of capacity,” she explained. “The insurance linked security space is also evolving in its appetite and ability to support cyber. This is welcome additional capacity as some traditional reinsurance markets have curtailed their cyber appetite. ILS capacity may also prove to be supportive of large individual enterprises who are seeking more limit.”