How reinsurers can be better prepared for cyber insurance
Above: Ransomware is a pressing cyber threat for businesses. The proportion of ransomware attacks jumped by 62% between 2019 and 2020. Source: Statista
One of the most obvious impacts of COVID-19 was the shift to remote working for non-essential workers. More than 18 months on, work from home arrangements remain for many amidst a bumpy COVID recovery.
As workloads continue to go cloud first, this places a bigger demand on security due to an increase in the number of attack surfaces, forcing companies to regard every user as a potential security threat. This flow-on effect makes Google and Amazon’s entry into cyber insurance coverage this year especially well-timed because the pandemic has jolted businesses into online security awareness - GWP of standalone cyber policies jumped by 29 % between 2019 and 2020. By 2025, this niche but rapidly growing sector is forecast to be worth over 20 billion USD, with a CAGR of 24.3% over the next five years.
At the same time, the market is being driven by a highly dynamic risk landscape, higher rates, and higher loss ratios, making cyber a business line that is not only fluid but potentially very lucrative. To be primed for entry into cyber risk, a reinsurer requires strong partnerships with third party experts to understand the characteristics of the newest cyber threat, to obtain valuable data fast so that cyber insurance pricing models can be promptly adjusted to account for the latest risk level.
API microservices provide the flexibility needed to meet these demands because of their serverless nature. Being fully configurable and customizable allows reinsurers fitted with API microservices to deploy their cyber products down the value chain with ease, updating cyber products with a mere few lines of code.
Moreover, having API microservices puts the reinsurer in a good position to collaborate with business partners utilizing the latest in cyber readiness or AI-based tools. Technological innovation has made it possible for firms to assess the risk of cyber attacks on their customers at the touch of a button and in real time. Leading analytics tools also exist for insurers, reinsurers, and brokers to estimate financial loss from cyber attacks, or model idealistic worst case scenarios and better understand how they can diversify their portfolio concentration. .
Due to the agility inherent within API microservices, reinsurers can improve their reporting and data governance, and redesign their products soon after synthesising disparate sources of information. The benefits that come from a serverless architecture places reinsurers in good stead for a future where risks will be amplified by remote working and an increased reliance on third party technology and appliances.
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