EIOPA published a report on understanding cyber insurance through a structured dialog with insurance companies in Europe. With the stand-alone cyber insurance market located predominately in the United States and only a fraction of the total market in Europe and with available reports and surveys focusing on the global or the US insurance market, very little attention has been paid to the European market so far. One of the key findings of the report confirms the need for a deeper understanding of cyber risk, which is a core challenge for the European insurance industry.
This challenge generates or fosters other challenges, such as improper treatment of non-affirmative risks and difficulties to quantify risks. The outcome of this structured dialog with the industry provides useful insights on the functioning, growth potential, challenges and risks of cyber insurance in Europe in the context of the expected growing importance of cyber insurance in the portfolios of (re)insurers. Additionally, the assessment finds that the cyber insurance industry expects a gradual increase in the demand for cyber insurance, mainly driven by new regulations, increased awareness of risks, and a higher frequency of cyber events. Lack of specialized underwriters, data, and quantitative tools are key obstacles to the development of the industry. Regulation may be welcomed by the industry in a moderate fashion, as it could help to address some of the identified challenges notwithstanding the need for compliance with the Solvency II Directive (2009/138/EU).
This report is based on a survey with responses to a set of 14 qualitative questions answered by 13 (re)insurance groups located in Switzerland, France, Italy, Germany, and the United Kingdom. The sample of eight insurers and five reinsurers was selected according to the expertise and current exposures in cyber insurance. The survey was conducted through three-party telephone interviews (EIOPA, national supervisory authorities, and participating (re) insurance group). This report is the first attempt by EIOPA to enhance the level of understanding of cyber risk underwriting, with a focus on the European insurance market. Further work in this field is necessary. Therefore, EIOPA included a combination of qualitative and quantitative questions on cyber risk in its 2018 Insurance Stress Test.
Keywords: Europe, EU, Insurance, Cyber Risk, Cyber Insurance, EIOPA
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