1997 was a big year for a number of different reasons. Tony Blair was elected Prime Minister of the UK. The first Harry Potter book was published. And two former colleagues decided to set up a small online DVD rental service in California, settling on the name Netflix.
On April 15th of that year, the insurance industry had its own groundbreaking moment, even if it wasn’t immediately obvious quite how groundbreaking it was at the time. At that year’s International Risk Insurance Management Society’s convention in Hawaii, through the launch of a brand new insurance policy from AIG (the ‘Internet Security Liability Policy’ to be precise), Cyber Insurance as we know it was born.
The policy in question was Third Party Liability based, aimed at protecting companies such as Amazon that were collecting customer credit card numbers and storing them on servers. Steve Haase, the insurance agent who initially came up with the idea for the policy, was ultimately awarded the ‘Advisen Cyber Legend Award’ in 2014 in recognition of his efforts. But back in April 1997, there was very little fanfare. Haase and some friends celebrated after the conference with a ‘Breach on the Beach’ party. About 20 people attended in total.
Since then, the Cyber Insurance market has expanded massively, and looks to be getting bigger and bigger with each new year. By way of an example, the global Cyber Insurance market tripled in volume over five years ending in 2022, according to the Swiss Re Institute, with direct written premiums worldwide totalling an estimated $13 billion. And in North America alone, Cyber Insurance claims reached record levels in 2023, according to insurance broker Marsh, with the firm receiving over 1800 Cyber Claims reports from clients in the US and Canada.
With the increased frequency, sophistication and damage of Cyber attacks, more and more people and institutions are now searching for Cyber coverage that protects them from these risks. However, the Cyber Insurance industry faces significant challenges going forward, including a lack of historical data, a lack of ability to predict the future of Cyber risks, the possibility of large cascading loss events, uncertainty within the market about specifically what is covered under such policies, and legal battles over fundamental issues.
Whilst the future growth of Cyber Insurance depends upon how and if these are issues are resolved, it’s safe to say that there’ll be a huge amount of interest in this particular area of insurance going forward, whatever happens.