In the wake of concerns over cyber risk escalating by the day, businesses need to do much more to integrate cybersecurity into their risk management programmes, asserts Swiss Re.
Zurich-based Swiss Re Group is a wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer.
In its Sigma report titled “Cyber: Getting to grips with a complex risk,” Swiss Re said, “the costs of a cyber breach can escalate well beyond managing the fallout of lost or corrupted data.”
“Firms must now factor in the potential damage to their reputation — physical and intellectual property — and also disruption to business operations. The increasing scope and magnitude of potential costs associated with cyber incidents reflect the ever-evolving cyber risk landscape,” Swiss Re said.
Three factors — speed of digital transformation, sophistication of hackers’ alertness and spread of hyper-connectivity — governed the changing landscape, it said.
While a dedicated cyber insurance market was developing rapidly, the scope of its cover was modest relative to potential exposure, it pointed out.
“Product and process innovation and also advanced analytics will help foster improved cyber insurance solutions and extend both the boundaries of insurability and reach of cover.”
Nevertheless, some cyber risks, especially related to extreme catastrophic loss events, might be uninsurable, Swiss Re said.
Given this, the reinsurer argued for a government-sponsored backstop similar to the state support for protection against catastrophic terrorism risks.
“More broadly, governments have an important role in promoting cyber resilience, including measures to improve cyber information capture and diffusion, and setting laws and regulations about how cyberspace is used and protected. By reshaping incentives and increasing awareness of cyber threats, governments can further nudge the private sector into developing improved market-led solutions,” the report said.
The sigma report is e published under the "Swiss Re Institute" banner. The Swiss Re Institute was formally launched on Wednesday with an intention to provide high-quality research and outreach capabilities under one-roof.
