EIOPA Report Confirms Need for Cyber Resilience Framework for Insurers
EIOPA published a report focuses on the cyber risk profile of insurers from the perspective of operational risk and analyzes the challenges and opportunities in the cyber insurance market in Europe. The findings identified the key challenges faced by cyber underwriters and confirmed the need for a sound cyber resilience framework for insurers.
The report finds that clear, comprehensive, and common requirements on the governance of cyber-security as part of operational resilience would help ensure the safe provision of insurance services. This would include a consistent set of definitions and terminology on cyber risks to enable a more structured and focused dialog between the industry, supervisors, and policymakers, which could further enhance the cyber resilience of the insurance sector. Furthermore, the report finds that enhanced data collection on cyber incidents and losses should allow insurers to manage and price their affirmative cyber risk exposures more effectively. Having common and harmonized standards for cyber-risk measurement and cyber-incident reporting could greatly facilitate the understanding of cyber risk underwriting. To this end, creating a European-wide cyber incident-reporting database, based on a common taxonomy, could be considered as well.
The report highlights that the cyber insurance market in Europe is still small in size but growing rapidly. In 2018, the data show an increase of 72% in terms of gross written premiums for the surveyed insurers and this increase amounts to EUR 295 million in 2018 compared to EUR 172 million in 2017. However, non-affirmative cyber exposures (where cyber risk is neither explicitly included nor excluded in an insurance policy) remain a source of concern. While common efforts to assess and address non-affirmative cyber risks are under way, some insurers have adopted a "wait-and-see" approach to address non-affirmative cyber risk, where the implementation of action plans to address non-affirmative exposure depends on the materialization of future events. Therefore, further effort is needed to properly tackle non-affirmative cyber exposures to address the issue of potential accumulation risk and to provide clarity to policyholders.
This report is based on the responses of 41 large (re)insurance groups across 12 European countries—Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, and United Kingdom. The sample under consideration is similar to the one for the 2018 Insurance Stress Test by EIOPA, representing a market coverage of nearly 75% of total consolidated assets.
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Keywords: Europe, Insurance, Cyber Risk, Operational Risk, Cyber Resilience Framework, Governance, Underwriting Risk, EIOPA
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