Cyber insurance first came into existence in the 1990s to safeguard the initial spate of internet companies against common hazards like
- Data destruction
- Unauthorised access to systems access
- Computer viruses.
The greatest threat in the 1990s was the erosion of company spreadsheets, which soon became far more dangerous and began causing losses worth millions of dollars, mainly due to the internet explosion– which meant an increasing amount of data being saved online.
The International Computer Security Association (ICSA) first launched the earliest separate hacker insurance policies in 1998. Ever since, the cyber insurance market has risen to 50-70 insurers from markets in London, Bermuda and the US.
However, cyber insurance truly gained prominence in 2005, and the value of premiums associated with it is set to touch $7.5 billion in 2020. Here’s why.
- A report from Hamilton Place Strategies suggests that the cost associated with a cyber-attack for US-based enterprises has risen by 192% since 2005.
- Between 2005 and 2014:
- Number of cybercrimes have risen by 24.4% annually
- Number of impacted firms has surged by 22% every year
- Incident/Company ratio rise from 1.39 in 2005 to as high as 1.61 by 2016
- As per PwC, nearly 33% of all U.S. firms currently buy some form of cyber insurance.
One of the factors that make cyber insurance rather difficult to understand is that it is constantly evolving. This means that risks change every now and then, and organizations do not always publicly declare the actual effect of cyber-attacks on their business in order to escape negative publicity.
In simple terms, the financial implications of cyber-attacks are not considered altogether.