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Issue 07 / October 2015

Why risk managers and insurers must keep pace with the changing cyber risk environment

At a glance
  • Lack of innovation frequently tops list of risk managers’ concerns about the insurance market
  • Potential annual losses from cyber-crime estimated at $375–575 billion
  • Scope of cyber risk insurance is expanding, with policies covering contingent business interruption and reputational damage
Cyber risk insurance is increasing in breadth and capacity but more will need to be done, says Christine LaSala

Insurance companies and risk managers are struggling equally to keep pace with a fast-changing corporate risk environment. 

Cyber-crime losses were estimated at 15–20% of the total value that the internet adds to global commerce.

Lack of innovation frequently tops the list of risk managers’ concerns about the insurance market: 60% of respondents to a recent survey by Airmic (the UK’s risk management association) marked it in their top three.

Technology, cyber-related exposures especially, represents a protean risk. Not only is the frequency and magnitude of catastrophic data-related losses continuing to rise, but new forms of cyber-attack keep appearing. 

In June 2014, the International Institute of Strategic Studies took a credible stab at quantifying the potential annual losses from cyber-crime, which were estimated at $375–575 billion.

But the most remarkable measure was that the losses were estimated at 15–20% of the total value that the internet adds to global commerce each year.

Influencing senior management

How risk managers can add more value to boardroom decision making

http://www.resilience.willis.com/articles/2015/09/27/how-risk-managers-can-earn-seat-top-table/

Internet of woes

For businesses examining the potential offered by the ‘internet of things’, ranging from steel mills to the makers of household appliances, the risk implications are becoming a lot more complicated. Security experts demonstrated recently how car control systems can be hijacked using a laptop computer.

The revelations come on top of mounting evidence that malware can be used to interfere with industrial control systems.

The insurance industry is waking up to the wider world of interconnected and intangible risk, however: the scope of cyber risk insurance is expanding, for example.

Contingent business interruption insurance is on offer from a handful of specialist underwriters and a few insurers have launched stand-alone cover for the costs incurred by an event leading to loss of reputation.

Big advances in risk analytics, combined with abundant capital, are driving more insurers to produce innovative solutions. But with the rate of change within companies, and their risk profiles, seeming to rise inexorably, more will need to be done – and quickly.

Find out more

Photo of Christine  LaSala
Christine LaSala

Christine.LaSala@willis.com

Christine LaSala works closely with the leadership of Willis North America focusing on business development and expanding Willis’s footprint in the marketplace while helping Willis build a strong and vibrant client advocacy capability throughout the firm.

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Photo of Christine  LaSala
Christine LaSala

Christine.LaSala@willis.com

Christine LaSala works closely with the leadership of Willis North America focusing on business development and expanding Willis’s footprint in the marketplace while helping Willis build a strong and vibrant client advocacy capability throughout the firm.

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Resilience is the risk management magazine from Willis for business leaders around the world. Each issue explores the latest trends and issues facing multinational businesses as they compete in an increasingly dynamic and interconnected threat landscape.

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