The starting of a new year offers a good opportunity to reflect on changes over the past 12 months and predicts what is in store for the next. Since we can see a vague end to this difficult phase, it is time to envision the future of the world.
In the latest Accenture Consumer Survey, we found out that 67% of consumers anticipate companies to “build back better” from the current calamity through supportable digital solutions and investing in the long term. More than half of the employees who never worked from home want to continue it in the future as well. Besides, speed, resilience, and adoption of digital solutions have occurred faster in small businesses that have been able to thrive and survive in 2020.
But with these latest digital solutions comes new risks. Digital security will be much more than physical. To understand these risks, we looked at the industry with CyberCube that establishes in cyber insurance research.
Shift to technology transformation over the last year due to the global pandemic has been well recorded. The essential shift to working from home has fundamentally changed our thinking about the work environment. In addition to the present trends of the continued explosion of ransomware and the growth in managing remote workforces, 2020 was proofed by a range of major cyber risk instances. This consists of the Twitter breach, the Magento hack, and at the end of the year Solarwinds hack, which may be the most vital of all.
1. A hardening market
In the second quarter of 2020, the hardening demand has rapidly gained momentum. Even though the dust has not settled yet on the January 1 renewal season, it is clear that there have been extra increases as well as tightening of capacity in the cyber reinsurance industry. The effect varies between different segments, where the companies that have endured losses have been bearing the brunt. Since high excess layers are not considered as outside the burn layer in a large program, capacity for this segment has diminished, forcing many participants to get close to required limits, often at much higher rates.
Various cyber-specific market enlargement in the face of increasing prices, which will possibly deepen rapidly in 2021. Limitations in coverage, sub-limits in the circumstances, or exceptions to particular hazards can make it tougher for brokers to place particular risks.
Silver Lining of the market’s hardening condition is that companies that display a strong culture of proactive risk management and effective cyber protection will be recipients of relatively better conditions from the market. There is a growing difference between the companies that consistently perform well and those that are falling behind. With more data at their disposal to identify best practices in cyber hygiene, underwriters are pickier than ever regarding risk selection. Companies that display good Cyber protection may be rewarded with security signals, which can measure cyber maturity indicators.
2. Pricing Convergence
As the cyber market has matured, actuaries have been delegated to review portfolios with increasing priority. As individual insurers and teams have moved between various market players, there has also been a reduction in the previous price variation. In 2021, there will be an increased market harmony on the acceptable price for a particular risk. The competition in the market will continue to be strong, emphasizing policy language, end-to-end management of risk (both pre-and post-loss), and expertise in claim settlement.
3. Technology Transformation
Technology connected to the internet will continue to expand rapidly along with new risks. Hyper connectivity of 5g networks will become mainstream in 2021, permitting faster and reliable data and malware transfer. This will mean the end of “Network perimeter” as usual, making corporate networks more difficult to protect. The internet will increase its presence with the implementation of both consumer applications and expanded industrial use. The ongoing shift to the cloud will only strengthen our dependence on a lesser number of significant platforms.
4. Growth in attack vectors
The SolarWinds hack, which happened at the end of 2020, proved the importance of cyber protection. It demonstrated the potential consequences of severe state-backed hackers with up to 18,000 businesses affected by this malicious software upgrade, including various US government agencies. This hack revealed the connection of technology and dependence on a lesser number of vital vendors. So far, the financial consequences of this hack are still uncertain, it seems that the motive was espionage rather than criminal, it has provided vision into what is to come. This will highlight weaknesses in supply chains and pervasive software used in various industries. Like all the time, any network’s main vulnerability would work as the entry point of automated attacks.
5. Focus on accumulation
It wasn’t long ago that the
necessity to manage future accumulation risk in the cyber insurance industry was
seen as a privilege. Various incidents in the past three years have emphasized
that the problem is no longer a theoretical possibility – it is a grave
concern. Lloyd’s, PRA, and others have
recently improved their regulatory focus. By 2021, it will generally agree that
carriers must take an organized and systematic approach to manage risk
While these predictions are not exhaustive and the core of the insurance means that we will no doubt have to deal with the unexpected, an awareness of these important patterns will benefit us in the coming year.