While speaking at the Third Annual Fintech and Regulation Conference in Brussels, the EIOPA Chair Gabriel Bernardino discussed what EIOPA is doing and what should be done to cope with the challenges posed by cyber risk at a global level. He opines that these risks affect the insurance sector on two levels: the first involves the security of the insurance business and the second relates to the role of insurance in covering and managing cyber risk.
Mr. Bernardino believes that a well-developed cyber insurance market can help to raise awareness of businesses to the risks and losses that can result from cyber-attacks; to share knowledge of good cyber risk management practices; to encourage risk reduction investment by establishing risk-based premiums; and to facilitate responses to, and recovery from, cyber-attacks. The future demand for coverage of this kind will depend, to a large extent, on both the frequency of high-profile cyber incidents and legislative developments in relation to personal data protection. In this context, the implementation of the data protection regulation in EU may lead to a significant growth in cyber risk insurance, with estimates suggesting that there may be parity between the EU and U.S. markets in coming years. Although coverage of cyber risk by insurers is still in its infancy, most of the market is concentrated in the United States. Growth in this market, however, has been significant, with the current forecasts suggesting that premiums may reach USD 20 billion in 2025.
He added that EIOPA has been monitoring developments in the cyber insurance market for some time. Last year, EIOPA published a report titled "Understanding cyber insurance" based on a structured dialog with insurance companies across Europe. Through this dialog, EIOPA identified a number of issues relevant to the cyber insurance market in Europe. It was found that the cyber insurance industry expects a gradual increase in demand for insurance, mainly driven by new regulation, the increase in cyber risk related incidents, increased awareness of risks, and the increased frequency and severity of cyber attacks. Regulation may be welcomed by the industry in a moderate fashion, as it could help to address some of the identified challenges.
He also added that EIOPA took into account its work and these findings in the development of our supervisory convergence plan for 2018–2019. In this plan, cyber risk is identified as a priority under the supervision of emerging risks. As part of the activities in this field, EIOPA will develop guidelines regarding Information & Communication Technologies (ICT), security and governance, including cyber resilience, and will further develop supervisory practices that seek to assess information system resilience, cyber risk vulnerability, and the insurance industry’s use of big data. EIOPA will also look into an efficient way of carrying out stress tests on the resilience of the insurance sector to cyber-attacks. It is clear that cyber insurance affects countries worldwide, not just in Europe. Issues related to cyber security and cyber risk are, therefore, one of the three priorities of the EU-U.S. Insurance Project, in which EIOPA plays a leading role. He concluded that "This is a universal challenge! Everyone has to contribute to meet this challenge!"
Related Link: Speech (PDF)
Keywords: Europe, EU, Insurance, Cyber Risk, Regtech, Stress Testing, Guidelines, EIOPA
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.