How do brokers feel about this?
Demand for cyber insurance is rising, but not equally, as cyber dangers spread across businesses and geographical areas.
According to Alessandro Lezzi (pictured), group head of cyber at Beazley, while large businesses in North America and parts of Europe have embraced coverage, large segments of the global market, especially small and medium-sized enterprises (SMEs) and companies in Asia and Latin America, remain significantly underinsured.
According to Lezzi, this unequal growth offers brokers a crucial chance to intervene and reduce the worldwide cyber protection gap by educating clients, customizing solutions, and selling policies.
The disparity in cyber defense worldwide
Clients are increasingly more aware of the importance of cyber protection, according to Lezzi, although global adoption varies greatly by region and business size.
Large corporations and middle-market businesses exhibit comparatively high penetration rates in the US, where the cyber insurance industry has reached a mature state. However, the SME sector is falling behind even there.
“SMEs present a significant opportunity,” Lezzi told Insurance Business. “Misconceptions about risk are a major reason why penetration is still low.”
Whereas middle-market expansion across regions is only getting started, Europe and the UK are rapidly catching up, especially among major companies.
Lezzi sees long-term benefits, but Asia and Latin America are still further behind. “We anticipate significant growth as larger companies in these regions engage with cyber products and understand their exposures,” he stated.
The unexplored SME sector is one of the largest potential for brokers. Lezzi stated that product misalignment and a lack of awareness are the two primary obstacles.
According to him, “a lot of small businesses still don’t think they’re targets.” “Education is therefore essential.”
Brokers and carriers must collaborate to make sure the goods meet the needs and financial constraints of SMEs. Lezzi believes that a combination of proactive risk management, flexible product design, and worldwide education—particularly for underrepresented market segments—is essential to the future of the cyber insurance industry.
The top three issues that cyber insureds are worried about
Interest in cyber reportage is still sparked by current events. Recent, well-publicized cyberattacks on the UK retail industry provide examples that increase awareness and influence consumer behavior.
“During the ransomware surge in 2020 and 2021, we observed this pattern in the United States,” Lezzi remarked. Events give the risk a concrete form. They instill a sense of urgency, which raises demand.
Tailored solutions are being provided to meet this demand, especially in the area of risk mitigation. Beazley’s method, for instance, entails evaluating a client’s internal cyber posture in addition to examining external vulnerabilities, particularly those related to supply chains.
“A single company is no longer the focus of threat actors,” Lezzi stated. Their aim is service providers who have a wide reach. This changes the incentive structure and adds complexity to risk management.
Lezzi cited artificial intelligence, geopolitical volatility, and the potential of systemic cyber risk as the three main factors influencing the cyber industry today when asked about the biggest threats.
He declared, “AI is definitely top of mind.” It makes it easier for bad actors to enter the market. Less processing power is required, models are simpler to operate, and open-source tools are accessible.
Cyber danger has also changed as a result of the unstable geopolitical environment. Lezzi cited Russia’s decision to concentrate on its own internal infrastructure after the invasion of Ukraine, which temporarily decreased strikes directed at the West. In the meanwhile, tensions between Taiwan and China pose a changing problem.
Systemic risk, however, is arguably the most fundamentally worrisome threat: massive cyberattacks that have the potential to impact enormous sectors of the world economy. Beazley has made significant investments in this field, launching one of the first cyber catastrophe (cat) bonds in the market.
Lezzi has high hopes for the future of cyber insurance’s ability to improve business resilience. However, cooperation between clients, brokers, insurers, and cybersecurity specialists will be essential to success.
According to Lezzi, “it’s not just about covering losses.” “The goal is to prepare businesses, offer them guidance throughout the policy period, and assist them in becoming more resilient in general.”
